Oil market suffers fresh falls on strong dollar
Oil fell on Monday after the euro dived to a near seven-week low point against the US dollar over the eurozone debt crisis and after the arrest of IMF head Dominique Strauss Kahn, traders said.
New York's main contract, light sweet crude for June, or West Texas Intermediate (WTI), sank $1.75 to $97.90 a barrel.
Brent North Sea crude for delivery in June shed $1.38 to $112.45 in midday London deals.
In earlier trading in Asia, the euro fell as low as $1.4048, hitting the lowest point since March 29. It later pulled back to $1.4121.
A stronger greenback makes dollar-denominated commodities more expensive for buyers using weaker currencies. That tends to weigh on demand and spark lower prices.
"Safe-haven demand for the dollar is.. hitting commodity prices," said Commerzbank Carsten Fritsch.
"The firmer dollar, which is benefiting increasingly from mounting concerns about the future of the eurozone, is the main source of pressure here.
"The arrest of IMF head Strauss-Kahn shortly before today's meeting of the eurozone finance ministers has made speedy approval of a new aid package for Greece less likely," he added.
The arrest of the IMF chief threw a giant cloud on Monday over a meeting of EU finance ministers to approve a rescue for Portugal, fight new debt fires in Greece and name a new president for the ECB.
International Monetary Fund managing director Strauss-Kahn, pivotal in global efforts to tame Europe's debt crisis amid fears it could unleash new international financial market contagion, had been due at the Brussels talks.
Investors were also awaiting economic data in the United States, which is the world's leading oil consuming nation.
"Today, investors will be watching for the US Fed manufacturing data .. and housing market data that could give further momentum to the US dollar direction and thus affect crude oil prices," said Myrto Sokou, an analyst at Sucden brokers.
"It seems that it is a 'US dollar move' that currently dominates the oil market and weighs on crude oil prices, as the conditions in the eurozone remain fragile and nervous," she added.
The oil market sank last week on the back of mounting concerns that high price levels could erode energy demand.
The International Energy Agency last week cut its outlook for 2011 global oil demand growth by 190,000 barrels per day because of high oil prices and weaker recovery in rich countries.
© 2011 AFP