*Oil drilling rig.
04 June 2016, New York — Oil prices dipped on Friday on concerns about the U.S. economy, but Brent crude held close to $50 a barrel in choppy trading with support from a weaker dollar and relief that most OPEC members do not plan to flood the market with excess crude.
Weaker-than-expected U.S. non-farm payroll data sent the dollar index to its lowest since mid-May, which also supported crude prices. A weaker dollar makes oil cheaper for holders of other currencies.
But the numbers were negative for the U.S. economy which could limit energy demand, leading to the “push-pull” in the oil market, traders and brokers said.
The weak data raises concerns about U.S. gasoline demand this summer driving season, said Bob Yawger, director of the futures division at Mizuho in New York.
Brent crude futures LCOc1 dipped 8 cents to $49.96 per barrel by 12:21 p.m. ET. Brent’s price still remained almost double January lows, on track for its eighth weekly gain in nine weeks.
U.S. West Texas Intermediate (WTI) crude futures CLc1 were down 17 cents at $49, on track for its first weekly decline in four weeks.
Oil prices have rallied from this winter’s lows due largely to supply disruptions, particularly in Nigeria, Venezuela, Libya and Canada. On Friday, militants in the restive Niger Delta region that produces more than half of Nigeria’s oil claimed three new attacks on oil infrastructure, promising to bring the country’s oil production to “zero.”
Still, news that ExxonMobil lifted its force majeure on exports of Nigeria’s Qua Iboe crude oil, looked likely to bring barrels back to the market.
“If you’re starting to see some of those barrels coming back, well, that’s happening ahead of schedule, in my opinion,” Yawger said.
The tone of the Organization of the Petroleum Exporting Countries, OPEC, meeting in Vienna on Thursday supported prices “from the perspective that none of the major players (except Iran) indicated that they would be further flooding the market with oil anytime soon,” said Energy Management Institute analyst Dominick Chirichella.
Oil prices also drew support from further signs of falling U.S. shale output, with Thursday’s data from the U.S. Energy Information Administration showing a further decline in production last week.
Still, analysts have said it would take more time for the oil market to rebalance fully.
Oil fundamentals should shift into a supply deficit in the third quarter, and very large accumulated oil inventories should take more than a year to “normalize,” Credit Suisse wrote in a note on Friday.
*Devika Krishna, Libby George in London & Henning Gloystein in Singapore; Editing – Bernadette Baum & David Gregorio – Reuters
