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Petroleum industry

Crude Oil Prices Slip on Concerns Over Unemployment and Stronger Dollar

Strategic Insights

— 2 min read

Crude oil prices took a downturn on Thursday, settling 66 cents lower at $80.21 a barrel on the New York Mercantile Exchange, as concerns over high U.S. unemployment and a strengthening dollar weighed on the market. The rally in oil prices, which had risen nearly 15% in the last month, seemed to be approaching its limit, with gains past $80 a barrel becoming increasingly hard-fought and temporary. The mixed bag of U.S. economic data, including a decline in pending home sales and factory orders growing by less than expected, failed to raise hopes that higher demand would finally end the oil glut.

Key Takeaways:

  • Crude oil prices slipped 66 cents lower to $80.21 a barrel on the New York Mercantile Exchange, driven by concerns over high U.S. unemployment and a strengthening dollar.
  • The rally in oil prices, which had risen nearly 15% in the last month, seemed to be approaching its limit, with gains past $80 a barrel becoming increasingly hard-fought and temporary.
  • A stronger dollar further diminished investors' appetite to buy oil above $80 a barrel, making it more expensive for holders of other currencies.
  • The U.S. Labor Department reported that 29,000 fewer new jobless claims were filed last week, but the weekly report was overshadowed by the impending release of February unemployment data, which is expected to show a decline of 75,000 for nonfarm payrolls.
  • Economists are expecting a reduction in unemployment to boost oil demand in the U.S., the world's biggest consumer of crude, but a high unemployment rate threatens gasoline demand, reducing the number of commuters and summer vacation drivers.
  • Darin Newsom, senior analyst at DTN, stated that crude oil doesn't have a great deal of fundamental support, so the minute traders start to see reasons to get nervous, they'll start getting out.
  • Matt Zeman, president of trading at LaSalle Futures Group, said that without a considerably weaker dollar, oil will be fighting a tough battle in the low $80s, with no big factor to get it over the hump.
  • Front-month April reformulated gasoline blendstock (RBOB) settled 1.39 cents lower at $2.2337 a gallon, while April heating oil settled 2.50 cents lower at $2.0687 a gallon.

Statistics:

  • Crude oil prices slipped 66 cents lower to $80.21 a barrel.
  • The rally in oil prices rose nearly 15% in the last month.
  • The dollar strengthened against the euro to $1.3574, from $1.3712 earlier in the day.
  • The U.S. Labor Department reported 29,000 fewer new jobless claims filed last week.
  • Economists expect a decline of 75,000 for nonfarm payrolls in February.
  • The number of commuters and summer vacation drivers is expected to decline due to high unemployment.

Sources:

  • Dow Jones Commodities News via Comtex
  • Brian Baskin, Dow Jones Newswires; 212-416-2453; brian.baskin@dowjones.com
  • Darin Newsom, senior analyst at DTN
  • Matt Zeman, president of trading at LaSalle Futures Group

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