Oil futures fell down Friday, losing the previous session's big gain, after the government's November jobs report was not as robust as some traders had hoped.
The Labor Department report "wasn't a blockbuster number that would keep feeding the oil bull," said Phil Flynn, an analyst at Alaron Trading Corp., in Chicago.
The report showed employers added 94,000 jobs to their payrolls in November following October's 170,000. The data quashed the hopes of some oil investors that the Federal Reserve will cut interest rates by a half percent instead of the more widely expected quarter percent when it meets Tuesday, Flynn said.
Interest rate cuts tend to weaken the dollar against other currencies. Oil futures offer a hedge against a weak dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the greenback is falling.
Light, sweet crude for January delivery fell $2.30 to $87.93 a barrel on the New York Mercantile Exchange after rising $2.74 on Thursday.
Some analysts think volatility is becoming a central feature of a market whose sentiment seems to be changing from bullish to bearish. Several analysts said it was difficult to find reasons to explain Thursday's price run-up, or Friday's declines.
"In the last hour of (Thursday's) session, in the wake of nothing, (Nymex crude) spiked more than $1.25," said Stephen Schork, a trader and analyst in Villanova, Pennsylvania, in a research note.
Some analysts pegged the reason for Thursday's price surge on tough Bush administration talk on Iran. Others cited the administration's announcement of a five-year freeze in loan rates for homeowners affected by the subprime U.S. mortgage crisis or an Organization for Economic Cooperation and Development estimate that China's economy is growing faster than initially expected.
Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois, is skeptical that any of these reasons adequately explains crude's recent volatility.
"We're just going to see these big daily swings, and at the end of the day people are just going to be scratching their heads," Ritterbusch said. "My biggest reason for (Friday's declines) would be that we ran up too far yesterday."
Other energy futures also fell Friday. January heating oil futures fell 5.07cents to $2.4943 a gallon on the Nymex, while January gasoline futures fell 3.39 cents to $2.2674 a gallon. January natural gas futures fell 11.5 cents to $7.215 per 1,000 cubic feet.
In London, January Brent crude fell $1.83 to $88.35 a barrel on the ICE Futures exchange.