MW: Oil rises nearly 2% as dollar falls, stock futures gain
Oil futures gained nearly 2% Friday, as dollar weakness and expectations of further output cuts by the OPEC oil cartel appeared to outweigh data showing that U.S. employment soared to the highest rate in over 25 years.
Crude oil for April delivery rose 94 cents, or 2.1%, to $44.56 a barrel in electronic trading on Globex.
More than 2.5 million jobs have been wiped out over the past four months alone, the Labor Department reported Friday. The U.S. economy lost 651,000 jobs in February, the fourth month in a row where job losses were near or above 600,000.
The unemployment rate soared to 8.1%, the highest rate in over 25 years. Job losses in February were close to expectations. See Economic Report.
"From all angles this negative number represents severe weakness in the U.S. economy, but going into the release, there was a rumor that non-farm payrolls could fall by one million," said Kathy Lien, director of currency research at GFT.
The fact that the data was better than the rumored number led to an improvement in risk appetite, Lien said in a research note.
"Weakness in the U.S. economy has been discounted and in many regards, traders are focusing on what's in store for the next months and they are relieved that job losses did not hit one million," Lien said. "A lot of fiscal stimulus is in the pipelines which could help stimulate the economy."
On Wall Street, U.S. stock futures reversed early losses to trade higher, pointing to initial gains when the market opens. See Indications.
In the currency markets, the dollar extended its losses against other major currencies after the jobs data. The dollar index which measures the currency against a trade-weighted basket of six global counterparts, fell 0.3% to 88.03 compared with 88.20 before the data. See Currencies.
Oil futures fell 4% on Thursday, pacing losses in U.S. stocks.
"There is no change in our view that oil prices will remain trapped in a sideways drift for the time being, with the downside being supported by the upcoming OPEC meeting, while the upside will be held in check by the grim macro backdrop," said Edward Meir, an analyst at MF Global, in a research note.
"We expect the cartel to put through a modest cut when it gets together and judging by how well the market is holding up, participants seem to be expecting the same," Meir said.
The Organization of Petroleum Exporting Countries has already announced a reduction in output of 4.2 million barrels a day since September, equivalent to about 5% of global oil demand. OPEC members will meet on March 15 in Vienna.
Also on Globex, April reformulated gasoline rose 1 cent to $1.33 a gallon and April heating oil rose 3 cents to $1.19 a gallon.
April natural gas futures were flat at $4.09 per million British thermal units.
