Investing.com -- Crude futures fell slightly, halting a massive two-day rally as the Dollar recovered on Friday after a strong U.S. monthly jobs report augmented hawkish arguments for a near-term rate hike from the Federal Reserve.
On the New York Mercantile Exchange, WTI crude for September delivery traded between $41.06 and $42.09 a barrel before closing at $41.80, down 0.13 or 0.31% on the session. At one point this week, the front month contract for U.S. crude closed below $40 for the first time since mid-April. On the Intercontinental Exchange (ICE), brent crude for October delivery wavered between $43.52 and $44.48 a barrel, before settling at $44.27 down 0.02 or 0.05% on the day.
The international and U.S. domestic benchmarks for crude are currently down by more than 15% from their June highs.
On Friday morning, the U.S. Department of Labor said in its monthly employment report that the economy added 255,000 nonfarm payrolls in July, marking the second consecutive month that the labor market has added more than 200,000 jobs. At the same time, the labor participation rate ticked up by 0.1 to 62.8% while the unemployment rate remained flat at 4.9%. The Federal Open Market Committee (FOMC) will receive one additional monthly jobs report to judge the strength of the labor market before it meets again in late-September.
Any rate hikes by the FOMC this year are viewed as bullish for the dollar, as foreign investors pile into the greenback in order to capitalize on higher yields.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, gained more than 0.40% to an intraday high of 96.50. The index is still down by more than 1% since hitting four-month highs of 97.62 early last week. Dollar-denominated commodities such as Crude become more expensive for foreign purchasers when the dollar appreciates.
Elsewhere, oil services firm Baker Hughes said in its Weekly Rig Count report that U.S. oil rigs last week increased by seven to 381 for the week ending on July 29. It represented the sixth consecutive week of weekly increases among oil rigs nationwide. Concurrently, gas rigs fell by five to 81, while miscellaneous rigs dropped by one to two. Overall, the total rig count increased by one to 464.
Rising rig counts are viewed as a lagging indicator for increased drilling activity nationwide. As such, the latest data indicates that producers were more prone to ramp up output in June when U.S. crude surged to $50 a barrel than in the spring when oil prices were recovering from 13-year lows.
Crude futures are up sharply since falling as low as $26.05 a barrel in mid-February. Nevertheless, oil prices are still down considerably from their level two summers ago when they peaked at $115 a barrel.