Oil drops as dollar strengthens; Stimulus in doubt on jobs data

Oil fell on Friday, erasing gains for the week, as the dollar strengthened on speculation the U.S. jobs market may have emerged from a soft patch, putting into question the urgency of further monetary stimulus.
U.S. crude for November fell for a second day, shedding as much as 52 cents or 0.6% to $81.15 a barrel at 0201 GMT, having slid 1.9% on Thursday, when it touched $84.43, the highest since May 4. The front-month contract is down a few cents from last week's close.
ICE Brent for November declined 36 cents to $83.07.
"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, referring to the inverse relation between the U.S. currency and oil, which becomes dearer to most as the greenback strengthens.
New U.S. claims for jobless benefits hit a near three-month low last week, a report showed on Thursday, suggesting some let up in labor market distress ahead of a monthly report due later on Friday that is expected to show non-farm payrolls were unchanged in September.
There is a risk that employment declined after an independent report on Wednesday showed private employers unexpectedly cut jobs by 39,000 in September.
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 cut.
"Spot oil prices are likely to continue to rise through the start of winter," according to JP Morgan.
Expectations for an expansionary monetary policy have driven the euro up 6% since August and also pushed the greenback to a record low against the Swiss franc and a 15-year low against the yen. The dollar gained 0.14% against a basket of currencies on Friday.
OPEC meeting
The Organization of the Petroleum Countries (OPEC) meets in Vienna next week for the first time in seven months, during which prices have mostly stayed within the $70-$80 range the group favours, despite persistent oversupply especially in top oil consumer the United States.
Robust prices might induce OPEC to pump more, helping to calm a rising market and limit damage to a fragile economy, but it is unlikely to agree a formal change in output.
"An important question to be asked is whether inventories will tighten markedly as OPEC adopts policies to reduce the stock overhang, or whether prices will move higher to choke off demand and create inventory in the process," JP Morgan said.
Workers at a French refinery joined a strike at a key oil port for only for a few hours on Thursday and said they would resume protests next week as part of a nationwide day of wrath over pension reforms.
Asian stocks made a stuttering start on Friday, with investors cautious ahead of the key U.S. non-farm payrolls report and strong currencies across the region weighing on exporters.