Forexpros – Crude oil futures extended losses on Monday, trading below USD99-a-barrel as a broadly stronger U.S. dollar and growing concerns over the handling of the euro zone’s debt crisis weighed, while fears over a disruption to Iranian oil exports limited losses.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in January traded at USD97.95 a barrel during early U.S. morning trade, tumbling 1.46%.
It earlier fell by as much as 1.7% to trade at a daily low of USD97.77 a barrel.
EU leaders agreed to implement stricter budgetary rules across the euro zone and to provide EUR200 billion in loans to the International Monetary Fund to assist countries with debt problems.
However, investors remained uncertain over whether the measures would go far enough to tackle the region’s two-year-old debt crisis after the European Central Bank indicated that it had no plans to increase its bond purchasing program.
Sentiment was also hit after ratings agency Moody’s warned that the debt crisis in the euro zone was still in a “critical” and “volatile” stage, adding that it will revisit ratings of all euro zone member states in the first quarter of 2012.
The news saw the euro drop to a two-week low against the U.S. dollar, while the dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, rallied 1.05% to trade at 79.98, the highest since October 6.
Oil prices typically weaken when the U.S. currency strengthens as the dollar-priced commodity becomes cheaper for holders of other currencies.
Euro zone developments have dominated trading in the oil market for the last several months, amid worries that the sovereign debt crisis could trigger a broader economic slowdown that would curb demand for oil.
The euro zone accounted for nearly 16% of global oil consumption in 2010, according to data from British Petroleum.
Meanwhile, oil prices continued to draw support from the prospect of a disruption to oil exports from Iran. Earlier in the day, a member of the Iranian parliament’s National Security Committee said that the military was set to practice its ability to close the Gulf to shipping at the narrow Strait of Hormuz, the most important oil transit channel in the world.
Iran’s energy minister told Al Jazeera television last month that Tehran could use oil as a political tool in the event of any future conflict over its nuclear program.
Iran is the world’s fourth largest oil producer, pumping nearly 5% of the world’s oil in 2011 and the second biggest exporter among the Organization of the Petroleum Exporting Countries.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for January delivery fell 1.07% to trade at USD107.31 a barrel, with the spread between the Brent and crude contracts standing at USD9.36 a barrel.
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