Crude oil futures - Weekly review: 03-07 October 2011

Forex News – Crude oil futures eased off a seven-day high in choppy trade on Friday, paring strong gains made on the back of better-than-expected U.S. employment data, after ratings agency Fitch downgraded the credit ratings of Italy and Spain.

On the New York Mercantile Exchange, light sweet crude futures for delivery in November traded at USD82.72 a barrel by close of trade on Friday, jumping 4.78% over the week, the largest weekly gain since early March.

Crude prices rose to USD83.98 a barrel, the highest price since September 28, following the release of better-than-expected U.S. employment data.

The U.S. Department of Labor said nonfarm payrolls rose by 103,000 in September, nearly doubling expectations for a gain of 53,000. The data showed that payrolls for the previous two months were revised up by a total of 99,000, while the unemployment rate remained unchanged at 9.1% as expected.

However, gains were trimmed after Fitch cut Italy’s rating to A+ from AA- while Spain’s rating was reduced by two notches to AA- from AA+, citing the worsening euro zone debt crisis and fiscal situation in both countries.

In addition, fellow ratings agency Moody's put Belgium's ratings on review for a possible downgrade, citing long-term funding risks and high public debt.

The news prompted investors to shun riskier assets, such as stocks, commodities and high yielding currencies, and flock to traditional safe haven assets like the U.S. dollar.

Crude prices have come under pressure in recent weeks amid concerns over the euro zone’s sovereign debt crisis and fears over the global economic outlook. Futures fell to a one-year low of USD74.95 a barrel on Tuesday, before rebounding to post three consecutive days of gains.

Crude prices found support after Federal Reserve Chairman Ben Bernanke said Tuesday that the central bank was ready to do more to bolster U.S. economic growth as the economic recovery has been far less robust that the Fed had hoped.

Futures were boosted on Wednesday after the U.S. Energy Information Administration said in its weekly report that U.S. crude oil inventories declined by 4.7 million barrels last week, confounding expectations for a 1.5 million barrel increase.

On Thursday, crude prices jumped nearly 3.5% after the European Central Bank announced measures to boost liquidity to euro zone lenders, while the Bank of England implemented a fresh round of monetary easing measures.

Elsewhere, on the ICE Futures Exchange, Brent oil futures for November delivery traded at USD104.06 a barrel by close of trade on Friday. The Brent contract rose 2.02% over the week, with the spread between the Brent and the crude contracts narrowing to USD21.35 a barrel.