09 November 2015 – Brent crude futures edged higher on Monday, recovering from a three-day decline, but gains were capped by a firm dollar after robust US employment data fuelled bets for an interest rate hike before the year is over.
The dollar held near its loftiest in almost seven months versus a basket of currencies after US nonfarm payrolls jumped 271,000 in October, far exceeding the 180,000 increase that economists polled by Reuters had predicted.
The dollar’s strength is likely to extend ahead of a likely rate increase by the Federal Reserve in December, and could be a key drag on prices of oil and other commodities, said Ben Le Brun, market analyst at OptionsXpress in Sydney.
A stronger greenback makes dollar-priced assets more costly for buyers using other currencies.
On the other hand, “the US economy is running on its own steam now and in a position where the Federal Reserve deems that a small interest rate hike is not going to damage confidence in the economy,” said Le Brun.
“That should be a positive in terms of demand for crude.”
Brent crude for December delivery was up 41 cents at $47.83 a barrel early on Monday, after falling more than 1% on Friday.
December US crude gained 35 cents to $44.64 a barrel after touching a 1.5-week low of $43.83.
Hedge funds raised their bullish wagers on US crude last week by the most in six months, data showed on Friday, as speculators bought into oil contracts in forward months on the bet market fundamentals will take time to improve.
Weekend data from China, the world’s second-largest oil consumer, showed the country’s crude oil imports fell 5.7% from the previous month to 26.35 million tonnes in October.
China’s imports of other commodities such as iron ore, copper and coal also fell last month as disruptions from the National Day holiday were compounded by slower demand.