Forexpros – Crude oil futures fell sharply on Friday, trimming a weekly gain as growing fears over the euro zone’s sovereign debt crisis coupled with a broadly stronger U.S. dollar dragged down prices.
On the New York Mercantile Exchange, light sweet crude futures for delivery in October traded at USD87.90 a barrel by close of trade on Friday, gaining 1.41% over the week.
Crude prices fell 1.6% to hit a four-day low of USD86.99 a barrel on Friday as concerns over the euro zone’s debt crisis intensified after a meeting of European Union finance ministers in Poland failed to produce an agreement on how to resolve the region’s escalating debt crisis.
Fears over a possible Greek debt default also weighed on sentiment as EU ministers postponed a decision to release the next tranche of aid to the debt-laden country until next month.
The news boosted the U.S. dollar against the single currency, while the dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, rose 0.34% on Friday to settle at 77.04.
Oil prices typically weaken when the U.S. currency strengthens as the dollar-priced commodity becomes more expensive for holders of other currencies.
Crude prices spiked higher on Thursday after the European Central Bank announced that it would provide additional dollar liquidity to euro area lenders in a move coordinated with the Federal Reserve and other major central banks.
However, prices pulled back after a flurry of downbeat U.S. economic data, including reports showing that manufacturing activity in New York and Philadelphia contracted in September, underlined concerns over a slowdown in U.S. demand.
On Tuesday, crude oil futures jumped to a one-month intraday high of USD90.50 a barrel as a broadly weaker U.S. dollar and a significant drop in U.S. crude supplies underpinned prices.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for November delivery traded at USD112.08 a barrel by close of trade on Friday. The Brent contract rose 1.45% over the week, with the spread between the Brent and the crude contracts widening to USD24.18 a barrel.
Wall Street lender JP Morgan-Chase said in a report Friday that production from the Sarir and Mesla oil fields in Libya are expected to reach 200,000 barrels a day by the end of September.
The report added that, Libyan figures “tend to be contradictory, but there seems to be a growing view that production could reach 300,000 barrels a day by the end of the year.”
In the week ahead, oil traders will be will be watching the outcome of the Federal Reserve’s extended policy setting meeting on Wednesday for any signs that the bank is looking at providing fresh monetary stimulus to support the U.S. economy, while developments in the euro zone are also likely to remain in focus.
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