Oil slides to multi-year lows; WTI at lowest in 1-1/2 years

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Global oil prices extended a months-long rout into bear market territory on Friday, with Brent notching a new 27-month low as the dollar spiked following upbeat U.S. employment data and further signs of undiminished crude supply.

The rallying U.S. dollar has re-emerged as a key driver for commodity prices in recent months, making raw materials more costly for most importers and reviving a once-popular spread trade. It reached a more than four-year peak on Friday after a report showing the U.S. economy created more jobs than expected last month, putting unemployment at a six-year low.

Brent crude for November delivery fell more than $1 to $92, after earlier touching $91.48 a barrel, its lowest since June 2012. It has fallen by 21 percent since June, when it climbed near $116 following the incursion of Islamist militants into Iraq.

U.S. November crude ended down $1.27 at $89.74 a barrel, its lowest close since April 2013. The contract has lost around $2 this week.

Analysts cited rising production from Russian oil fields emerging from maintenance, and a report from this week showing OPEC production hitting two-year highs of 31 million barrels per day (bpd)in September.

Investment bank Goldman Sachs said in a note sent to clients on Wednesday that $90 per barrel was a reliable floor for Brent in the medium term, also citing the strength of the dollar and the mismatch between supply and demand.

The Brent crude benchmark ended the week down for the fourth week in five and has fallen more than 15 percent this year.

Saudi's oil price cut to hurt other producers?
Saudi's oil price cut to hurt other producers?

The encouraging data for the U.S. economy spurred a rally in the dollar, which was up 0.96 percent against a basket of currencies. A strong dollar makes commodities priced in dollars more expensive for buyers using other currencies.

The spread between the front month Brent and U.S. crude futures contracts reached its narrowest since August 2013 at $1.42 a barrel, reflecting supply pressure on Brent and weak demand in Europe, where an overhang of unsold North Sea and West African barrels persists.

The Brent crude benchmark is set to end the week down for the fourth week in five, having fallen more than 15 percent this year. There was a slight retracement of Thursday's losses early in the session, but the overall trend remains to the downside.

Geopolitical tensions in the Middle East, eastern Europe and Asia have failed to prevent a slide in the oil price over the summer. Although Islamic State insurgents have advanced across northern Iraq, this has had little impact on oil production in the south to date.

Some analysts say that only a cut in output by the Organization of the Petroleum Exporting Countries (OPEC) will rescue oil prices. Although some OPEC countries are calling for supply cuts, other core members are betting that winter demand will revive the market, suggesting the group is no closer to any collective steps.