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Crude futures fall sharply, in spite of reduced U.S. oil rig count

CommoditiesSep 18, 2015 02:47PM ET
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WTI crude fell below $45 on Fri, while brent crude dipped under $48

Investing.com -- U.S. crude futures fell sharply on Friday erasing massive gains from earlier in the week, even as oil rig totals nationwide extended a streak of minor declines.

On the New York Mercantile Exchange, WTI crude for October delivery traded in a broad range between $44.25 and $47.03 a barrel, before settling at 44.73, down 2.17 or 4.66% on the day. Energy traders locked into profits from Wednesday's session when crude futures surged nearly 6% to close over $47 a barrel, their highest closing level in the month of September. For the week, Texas Long Sweet futures were relatively flat, falling by 0.40% or less than a quarter a barrel.

On the Intercontinental Exchange (ICE), brent crude for November delivery wavered between $47.16 and $49.75 a barrel, before closing at 47.55, down 1.55 or 3.13% on the session. Brent crude future fell by nearly 3% on the week, amid a volatile stretch that saw it close by more than 3% in a positive or negative direction on three different sessions.

Meanwhile, the spread between the international and U.S. domestic benchmarks of crude stood at 2.91, above Thursday's level of 2.18 at the close of trading. Earlier this week, the spread dropped to its lowest level in eight months.

Oil services firm Baker Hughes (NYSE:BHI) said in its weekly rig count on Friday that U.S. oil rigs last week fell by eight to 644, moving lower for the third straight week. U.S. oil rigs nationwide are still down substantially from their level last fall when they peaked above a total of 1,600. The count wavered throughout the summer after falling for 25 consecutive weeks earlier this year.

Energy traders remain concerned that prices could continue to fall, amid a global market oversaturated by a glut of supply. Their worries were not assuaged in spite of a significant draw last week when U.S. crude stockpiles fell by 2.1 million to 455.9 million barrels. Despite the decline, inventories still remain near levels not seen for this time of year in at least the last 80 years.

Crude futures are down by more than 50% from its peak above $100 a barrel last summer, after OPEC rattled global energy markets with a strategic decision to keep its production ceiling unchanged. The tactic triggered a protracted battle between the U.S. and OPEC for global market share, causing prices to fall near six-year lows.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, rose more than 0.30% to an intraday high of 94.98, before falling back slightly to 94.85. The index was on pace late Friday afternoon to close down by approximately 0.5% for the week.

Investors continue to digest dovish comments from Federal Reserve chair Janet Yellen on Thursday, after the U.S. central banks held short-term interest rates at record near-zero lows. A rate hike is widely viewed as bullish for the dollar.

Dollar-denominated commodities such as crude become more expensive for foreign purchasers when the dollar appreciates.

Crude futures fall sharply, in spite of reduced U.S. oil rig count
 

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