Investing.com -- Crude futures fell considerably on Friday, one day after OPEC failed to agree on a deal for a new output ceiling, thrusting concerns related to global oversupply back into focus.
On the New York Mercantile Exchange, WTI crude for July delivery traded in a broad range between $48.34 and $49.41 a barrel before settling at $48.69, down 0.48 or 0.98% on the session. On the Intercontinental Exchange (ICE), brent crude for August delivery wavered between $49.31 and $50.33 a barrel, before closing at $49.74, down 0.30 or 0.60% on the day. Oil prices remain near 7-month highs from late-May when WTI crude surged above $50 a barrel for the first time in 2016. Since falling to 13-year lows at $26.05 a barrel in mid-February, U.S. crude has surged by approximately 80%.
On Thursday, officials from OPEC's 13-member bloc broke off talks at their semi-annual meeting in Vienna without reaching a deal to cap its production ceiling. Although Saudi Arabia attempted to appease smaller members such as Venezuela, Ecuador and Nigeria by pledging to avoid major output increases in the coming months, Iran held firm on its plan to ramp up production to pre-sanction levels from 2007. Any coordinated attempts for a comprehensive production freeze likely will not occur until at least late-November when OPEC is scheduled to meet again.
Still, there is some optimism that Saudi Arabia and Iran have mended some fences in light of laudatory comments by Iranian oil minister Bijan Zanganeh on new Saudi counterpart Khalid al-Falih. Last month, the Saudi kingdom replaced longtime oil minister Ali al-Naimi with Al-Falih, the head of state-owned oil firm Aramco.
"Saudi Arabia realizes that price is a key part of the oil-market formula -- it balances supply and demand," Al-Falih told reporters in Vienna. "We realize that a long time under lower prices doesn’t bring enough supply to meet the rise in demand."
Elsewhere, oil services firm Baker Hughes said in its Weekly Rig Count report that U.S. oil rigs rose by nine to 325 for the week ending May 27, the largest weekly increase since last December. As a result, the combined oil and gas rig count rose by four to 407, representing only its second weekly increase this year. Any gains in the weekly rig count typically send lagging indications that crude production is about to increase.
Crude prices also fell slightly on Friday in spite of a massive decline in the dollar. The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, crashed more than 1.5% to a three-week low of 93.97. The index has tumbled more than 6% since early-December.
It came on the heels of a dismal May jobs report, released on Friday morning, which showed that the U.S. labor market added 38,000 jobs on the month, the slowest monthly gains in jobs since September, 2010. The downbeat report may also lower the odds that the Federal Reserve could lift short-term interest rates when it meets next on June 14-15. Any rate hikes by the Fed this year are viewed as bullish for the dollar, as market players pile into the greenback in order to capitalize on higher yields.
Dollar-denominated commodities such as crude become more expensive for foreign investors when the dollar appreciates.