Forexpros – Crude oil futures declined on Monday, dropping further below the key psychological level of USD100-a-barrel as market sentiment was dented amid ongoing concerns over the euro zone’s sovereign debt crisis.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in January traded at USD98.71 a barrel during European morning trade, slumping 0.79%.
It earlier fell by as much as 0.95% to trade at a daily low of USD98.55 a barrel.
All European Union countries except the U.K. agreed on Friday to pursue stricter budget rules and to provide up to EUR200 billion in loans to the International Monetary Fund to assist euro zone countries with debt problems.
However, markets remained cautious as the new fiscal union was not viewed as the decisive move needed to resolve the euro zone’s debt woes.
Speculation that S&P will carry out a mass downgrade of 15 euro zone members, including Germany, France, Italy and Spain dampened appetite for riskier assets.
The ratings agency said last week that it would announce any ratings changes “as soon as possible” after Friday’s summit.
Also weighing on sentiment, ratings agency Moody’s warned earlier that the euro zone’s debt crisis was still in a “critical” and “volatile” stage, adding that the region still faced increasing risks to cohesion.
The news prompted investors to shun riskier assets, such as stocks and commodities and flock to traditional safe haven assets like the U.S. dollar.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.55% to trade at an 11-day high of 79.57.
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.
Meanwhile, oil traders were looking ahead to Wednesday’s OPEC meeting in Vienna, where the group’s members are scheduled to meet to review production quotas. The group has not changed output targets since January 2009.
Wall Street investment bank Morgan Stanley said in a report Friday that, “Today’s elevated oil price is likely to discourage OPEC from cutting production quotas, regardless of the rhetoric from Vienna on December 14.”
Elsewhere, on the ICE Futures Exchange, Brent oil futures for January delivery fell 0.85% to trade at USD107.56 a barrel, with the spread between the Brent and crude contracts standing at USD8.85 a barrel.
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