09 March 2015 – Brent crude fell toward $59 a barrel on Monday as upbeat jobs data pushed the dollar higher, outweighing geopolitical tensions and the threat of output cuts in Libya and Iraq.
That came as Goldman Sachs on Sunday forecast oil prices would reverse recent gains on the back of rising inventories, with US crude expected to drop to around $40 a barrel.
Brent had eased 32 cents to $59.41 in early trade on Monday, after dropping 75 cents in the previous session. It fell 4% last week in its biggest decline since the week ended 9 January.
US crude was down 16 cents at $49.45. It closed down $1.15 in the previous session to complete a third straight week of declines.
“As a result and absent further unexpected Opec disruptions, we expect Brent oil prices and timespreads to reverse their recent strength, although the lack of a meaningful build in the past few months leaves risk to our forecast for (WTI) oil prices remaining at $40/barrel for two quarters skewed to the upside,” Goldman said in its note.
The dollar hit an 11-and-a-half year high against major currencies on Friday after US jobs data showed the unemployment rate fell to the lowest since May 2008 in February.
US economic data to be released on Tuesday could lead to a further strengthening of the US dollar which would be negative for commodities including oil, said Ben LeBrun, market analyst at Sydney’s OptionsXpress. A strong dollar makes oil, quoted and traded in the greenback, costlier for other currencies.
“The US dollar is continuing to strengthen. In the short-term it’s more about the dollar than anything else fundamentally,” LeBrun said.
He said geopolitical issues in North Africa and the Middle East “are all playing second fiddle to the US dollar”.
Up to 10 foreign workers are missing in the latest attack on Libya’s oil fields by Islamist militants and there is a possibility they have been taken hostage, Czech and Libyan officials said on Saturday.
Members of the Organisation of the Petroleum Exporting Countries should not cut output to “subsidise” higher-cost shale, Opec Secretary-General Abdullah al-Badri said on Sunday.