Forexpros – Crude oil futures were down sharply for a second day on Monday, dropping to a one-week low as lingering concerns over the sovereign debt crisis in the euro zone and a firm U.S. dollar reduced the appeal of commodities.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in November traded at USD77.80 a barrel during European morning trade, tumbling 1.77%.
It earlier fell as much as 2.15% to trade at USD77.37 a barrel, the lowest price since September 26.
Market sentiment was hit after the Greek government said Sunday it would not meet its deficit target this year, increasing expectations for an imminent default.
Inspectors from the European Union, the International Monetary Fund and the European Central Bank held discussions in Athens over the weekend and will soon decide whether the country is eligible to receive further financial assistance.
According to reports, Greece needs the latest round of aid to avoid running out of money by mid-October.
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 greenback jumped to an eight-month high against the euro, while the dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.29% to trade at 79.52, the highest since January 18.
Dollar-denominated oil futures contracts tend to fall when the dollar rises, as this makes oil more expensive for buyers in other currencies.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for November delivery slumped 1.01% to trade at a seven-week low of USD101.69 a barrel, up USD23.89 a barrel on its U.S. counterpart.
Wall Street lender Morgan Stanley cut its Brent forecast for next year to USD100 a barrel, down from a previous estimate of USD130, citing increasing supply and a weaker oil demand outlook.
The lender said in a report published over the weekend that, “Risk aversion in the near-term should drive strength in the U.S. dollar, which will be a headwind for oil prices.”
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