* Crude falls from 5-month high above $84/bbl
* French port strike enters 12th day
* Correlation to dollar temporarily breaks down
* Coming Up: U.S. non-farm payrolls for Sept; 1230 GMT
(Recasts, previous SINGAPORE)
By Emma Farge
LONDON, Oct 8 (Reuters) - Oil prices slipped towards $80 a
barrel on Friday as traders opted to take profits ahead of U.S.
jobs data, with some wary that the dollar-fuelled rally may have
run ahead of supply and demand fundamentals.
U.S. crude for November <CLc1> fell $1.26 to $80.41 a barrel
by 1016 GMT after touching a high of $84.43 a barrel the
previous day. ICE Brent futures <LCOc1> were down $1.46 at
$81.97 a barrel by the same time.
The U.S. economy probably added no jobs in September as
shrinking government payrolls offset modest gains in private
hiring, a Reuters survey showed ahead of data at 1230 GMT.
[]
Traders are cautious about placing fresh long positions
ahead of the data which could give a key insight into the state
of the U.S. economy and a really disappointing outcome could
stoke further selling, analysts said.
"While a sub-par nonfarm payroll number could trigger more
weakness in the dollar and possibly return commodity markets to
a steadier footing, a bigger negative surprise would revive
recession fears, and hit most markets hard despite what the
dollar ultimately does," said Edward Meir of MF Global.
Earlier this week, the U.S. Energy Information
Administration said domestic crude stocks rose by a
greater-than-expected 3.09 barrels last week and this could also
be weighing on prices, according to Tim Evans at Citi Futures
Perspective. []
"The larger issue remains the lack of physical tightness to
limit the downside...the (inventory) figures were bearish, not
bullish, and the downturn in prices serves as a reminder of
that."
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For graphics showing correlations to the dollar and
non-farm payrolls, see here:
http://graphics.thomsonreuters.com/AS/0810/LRP_20100810131826.jpghttp://graphics.thomsonreuters.com/AS/0810/LRP_20100810155836.jpg^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
SAFE HAVEN
On Thursday, oil prices jumped to a five-month high on the
back of a weaker U.S. dollar linked to an unexpected inflow of
fresh dollars into the economy.
This makes oil more appealing to both buyers holding other
currencies and those looking to shift from cash to commodities,
seen as safe havens.
"The dollar is the key short-term factor and the
reinstatement of the linkage with the dollar will stay for a
while yet," JP Morgan oil analysts led by Lawrence Eagles said.
The U.S. dollar was steady on Friday, suggesting a temporary
breakdown in the previously strong inverse correlation. []
Investors have this week braced for the Federal Reserve to
start pumping more money into the U.S. economy next month to
boost growth, after the Bank of Japan on Tuesday surprised
markets with an interest rate cur.
Expectations for an expansionary monetary policy have driven
the euro up 6 percent since August and also pushed the greenback
to a record low against the Swiss franc and a 15-year low
against the yen.
A strike in the French port of Fos-Lavera now in its 12th
day has supported oil prices this week but news from the
industry lobby UFIP that two refineries can continue output for
a limited number of weeks dampened sentiment. []
"What has been supporting prices has been the strike at
Fos-Lavera but the fact that some refineries decided not to join
may explain the sell-off," said Christophe Barret, energy
analyst at Credit Agricole.
The Organization of the Petroleum Exporting Countries (OPEC)
meets in Vienna next week for the first time in seven months.
Robust oil prices might induce OPEC to pump more crude,
helping to calm a rising market and limit damage to a fragile
economy, but the producer club is unlikely to agree a formal
change in output. []
(Additional reporting by Alejandro Barbajosa in Singapore;
editing by James Jukwey)
