ICE December Brent futures closed 38 cents lower at $85.56/b Friday as the US dollar surged, putting pressure on crude prices.
Front-month NYMEX December crude fell as low as $79.55/b, before settling down 58 cents at $80.54/b. The last time the front-month contract closed below $80/b was June 2012.
NYMEX refined products futures closed mixed. November ULSD futures ended the session 17 points higher at $2.5145/gal. November RBOB futures settled 2.63 cents lower at $2.1695/gal.
The NYMEX November contracts for ULSD and RBOB expired at the end of trading. December delivery is now the front-month contract.
A stimulus plan announced by the Bank of Japan surprised the markets and sent the yen into a tailspin. The yen pushed above 112 per dollar, its weakest level since December 2007.
The dollar was already gaining steam this week owing to a stronger-than-expected GDP report by the Department of Commerce and an upbeat assessment of the labor market by the Federal Reserve, which the central bank mentioned as part of its decision to end its bond buying program.
"Japan hitting the market with a massive stimulus package at the same time the US is pulling back from quantitative easing means divergent interest rates, and that is causing oil prices to move," Price Futures Group analyst Phil Flynn said.
A strong dollar makes greenback-denominated oil more expensive for buyers in Europe and Japan, which could erode demand, he said.
The US dollar index breached 87 for the first time since June 2010.
Another currency weakening against the dollar has been the Russian ruble, which continued to depreciate Friday, despite the Russian central bank's efforts to turn the tide by raising interest rates.
With oil futures sliding, attention is squarely on OPEC and whether the bloc's members will decide to trim output at its next meeting scheduled for November 27.
"Right now, it doesn't look like OPEC is going to do anything when you hear comments from the OPEC secretary general, the Iranians, the Saudis, all saying they are not in any rush to cut production," Tradition Energy senior analyst Gene McGillian said. "Of course, that could change as we get closer to the November 27 meeting."
