Investing.com -- Oil prices edged lower Friday, on course to register a sharp weekly loss as traders digested a stronger than expected U.S. employment report amid an uncertain demand outlook.
By 10:05 ET (14.05 GMT), the U.S. crude futures traded 0.5% lower at $81.92 a barrel, while the Brent contract dropped 0.3% to $83.83.
Strong payrolls could prompt another U.S. rate hike
Data released earlier Friday showed that U.S. jobs growth unexpectedly surged in September, as nonfarm payrolls increased by 336,000, well above the 170,000 estimated by economists.
Additionally, data for August was revised to show 227,000 jobs were added instead of the previous reading of 187,000.
While these figures suggest healthy growth in the largest economy in the world, traditionally good news for the crude market, a central tenet of the Federal Reserve's aggressive campaign of interest rate hikes has been a slackening in labor demand, which in theory could contribute to slowing wage gains. These figures could persuade policymakers to hike once more before the year’s end.
That would likely have a detrimental impact on the oil market given more tightening would likely weigh on growth going forward and also drive the U.S. dollar even higher, with the greenback having already hit a 11-month high earlier this week.
A strong buck makes commodities which are denominated in dollars, including oil, more expensive for foreign buyers.
Crude on course for hefty weekly losses
Oil prices were already on course for their worst week since March on renewed concerns about global growth - in part due to the relentless rise in borrowing rates.
U.S. crude oil has dropped more than 9% this week, while the Brent contract has fallen over 11%.
Weighing heavily was the largest weekly build in almost two years for U.S. stockpiles of gasoline, suggesting slowing demand in the largest consumer in the world.
Additionally, Russia announced on Friday that it had lifted its ban on diesel exports for supplies delivered to ports by pipeline. Almost three quarters of Russia's 35 million tonnes of diesel exports were delivered via pipeline in 2022.
These concerns about a bleaker macroeconomic outlook and the associated fuel demand destruction overshadowed the news earlier in the week that Saudi Arabia and Russia reaffirmed their pledge to continue removing at least 1.3 million barrels a day from the combined daily production of the two countries until the end of the year.
(Barani Krishnan contributed to this article.)