Oil up as Robust U.S. Jobs Surprisingly Gut Dollar; Russia Price-Fix Adds to Mix

By Barani Krishnan

Investing.com -- US jobs numbers overshot expectations again in October but the hedge funds that typically send the dollar rallying on that chose this time to hammer down the greenback — handing a win to oil and the rest of the commodities complex.

News that G7, or the Group of Seven rich nations, along with Australia have agreed to set a fixed price — rather than adopting a floating rate — on Russian oil later this month made it a complete storm for oil bears.

Futures of New York-traded WTI, or West Texas Texas Intermediate, and London-traded Brent surged as much as 5% at Friday’s close as oil bulls found their rhythm after being stymied for days over news of COVID lockdowns in top oil importing nation China. 

Both crude benchmarks had also slumped on Thursday in a belated reaction to the Federal Reserve’s renewed pledge from a day earlier to keep raising interest rates to curb inflation at four-decade highs. 

The Fed’s stance then had driven the Dollar Index, which pits the greenback against the euro, yen, pound, Canadian dollar, Swedish krona and Swiss franc, to a three-week high of 113.035 on Thursday. But on Friday, the Dollar Index dropped to below 111 at one point despite the United States adding 261,000 jobs last month in its October nonfarm payrolls report, almost 35% more than the 195,000 anticipated by economists.

Ed Moya, analyst at online trading platform OANDA, noted that the nonfarm payrolls report was “mostly hot, [with] a strong headline number, upward revisions, and further wage growth,” yet the “dollar is getting crushed here.”

“If the dollar continues to slide here, oil’s strength could be relentless,” Moya added.

WTI settled up $4.44, or 5%, at $92.61 a barrel. The session high was $92.81, marking a nine-week high after the U.S. crude benchmark breached $90 this week for the first time since Oct. 11. WTI was headed for a similar percentage gain on the week. WTI rose 5.4% on the week.

"WTI's action remains well supported by the 100-Day SMA of $88.60, with a scaling towards the 200 Day SMA of $97.70 next on bulls' agenda," SKCharting.com's chief technical strategist Sunil Kumar Dixit, said, referring to the Simple Moving Average.

Brent settled up $3, or 3%, at $97.67 per barrel. The global crude benchmark hit a session high of $98.74 earlier. 

Brent's weekly gain about 2%.

Friday's oil rally was further fueled by fears of the Kremlin’s reprisal to the G7 plan to cap the selling price of Russian oil in order to limit Moscow's ability to fund its invasion of Ukraine without throttling global supplies. Russian President Vladimir Putin has threatened in the past not to deal with countries that participate in the G7 plan or to suspend crude exports altogether, in retaliation against the scheme.