Oil prices closed lower on Friday as the dollar surged on robust U.S. jobs data, reasserting its influence over commodities as two days of short-covering and bargain-hunting in crude fizzled, bringing attention back to oversupplies.
Also on Friday, the number of rigs operating in U.S. oil fields rose for a sixth straight week, increasing by 7 rigs to a total of 381. At this time last year, drillers had 670 rigs in fields.
The dollar index rose 0.45 percent after data showed U.S. employment rose more than expected in July and wages picked up, raising the probability of a rate hike by the Federal Reserve this year.
A stronger dollar makes oil and other commodities denominated in the greenback less affordable to holders of the euro and other currencies, typically denting demand for such raw materials. The reverse is the case when the dollar falls.
In recent weeks, however, the dollar/oil trade appeared to have broken down as crude futures fell despite the U.S. currency weakening.