ET:Brent crude slips below $108 as dollar rises; demand concerns weigh
SINGAPORE: Brent slipped below $108 a barrel on Friday, reversing direction after two straight days of gains, as the dollar strengthened and demand concerns from industrialised nations weighed on prices.
The strong US jobs report, which helped oil gain as much as 3 per cent in the previous session, is not enough to keep pushing prices higher, and wide swings will continue until the market sees a clear demand trend emerging, analysts said.
The US dollar gained further after posting its best day ever against the Swiss franc on Thursday.
"The market needs strong indicators to be convinced about demand for oil and for prices to go up steadily towards $100," said Ken Hasegawa, a commodity derivatives manager at Japan's Newedge brokerage. "Till then, we are going to see big volatility, and swings of up to $2 to $3 in a day."
Brent crude for September fell as low as $107.34 and traded 52 cents lower at $107.50 by 0314 GMT. The benchmark is poised to gain 1 per cent on the week, reversing the previous week's slump of 9.3 per cent.
US oil slipped as low as $84.85 a barrel and traded 77 cents down at $84.95. In its third consecutive week of decline, the contract is set to fall 2.6 per cent on the week versus a fall of 9 per cent last week.
Crude rose on Thursday after a report from the Labor Department showed the number of Americans claiming new jobless benefits fell by 7,000 last week to a seasonally adjusted 395,000, the lowest since early April. The report offered hope for an economy battered for days by a credit rating downgrade and falling share prices.
Brent settled $1.34 higher at $108.02 a barrel, having swung between $104.43 and $108.08, adding to the 4 per cent leap on Wednesday. US crude settled up 3.41 per cent at $85.72 a barrel, bouncing from the day's low of $81.03. On Wednesday, it rose 4.5 per cent.
Oil trading volumes were also strong for a sixth straight day as traders piled into riskier assets such as commodities and equities. Gold dropped 1 per cent, extending losses from a fall of 1.6 per cent in the previous session.
The rebound in Brent is approaching its end, as indicated by a rising wedge, while US oil is expected to end the current rebound below $86.79 per barrel, as a strong resistance zone of $85.23-$86.79 would force it to drop, Reuters technical analyst Wang Tao said.
