Oil Seesaws on Strong Dollar, OPEC Decision

Reuters

Oil seesawed in volatile trade on Friday, with Brent hitting seven-week lows before recovering, as a surging dollar and an OPEC decision not to cut output in an oversupplied market led to a swing in crude prices.

Crude's biggest producers and shippers in the Organization of the Petroleum Exporting Countries agreed at a meeting in Vienna to stick to a policy of unconstrained output for another six months. The decision came despite warnings of a second lurch lower in prices, with members such as Iran looking to ramp up exports.

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Oil prices rose after the widely-expected OPEC decision, as market bulls embarked on a relief rally following the losses of the past two days, when both Brent and U.S. crude fell nearly 3 percent a day.

The dollar's surge on a stronger-than-expected U.S. jobs report for May doused the enthusiasm, however. A stronger greenback typically makes dollar-denominated commodities such as oil less affordable to holders of the euro and other currencies.

Aside from the resurgent dollar and fears of a U.S. interest rate hike, the oil market was also spooked by the euro's tumble as Greece delayed repayment of an IMF loan.

Data showing the U.S. oil rig count falling by 4 last week barely moved the market. Declining rigs indicate lower oil output in the future. The U.S. rig count has fallen for a 26th straight week though the pace of the drop has slowed.

After losing more than $1 early in the session, Brent and U.S. crude recovered to trade on either side of positive and negative territory.

By 1:25 p.m. EDT (1725 GMT), Brent was up 10 cents at $62.13 a barrel, after tumbling to an April 16 low of $60.94 a barrel.

U.S. crude rose 20 cents to $58.20 a barrel, versus a session low of $56.83.

"The dollar and the OPEC decision are both pulling the market opposite ways," said Phil Flynn, analyst at the Price Futures Group in Chicago.

"The jobs report just blew away expectations and set the dollar on an unexpected run that tore into oil's gains. But at the same time, bulls were already hedged for the OPEC decision not to cut output and ready for a relief rally after the losses of the past two days."

A London-based broker also cited technical reasons.

"$60.95 was a key number on the daily Brent chart," the broker said, explaining the rebound that followed Brent's seven-week low.

(By Barani Krishnan; Additional reporting by Vladimir Soldatkin in London and Henning Gloystein in Singapore; Editing by Meredith Mazzilli and Chris Reese)