Forex Pros — Crude oil futures were sharply lower on Monday, pressured by a broadly stronger U.S. dollar and amid concerns over a slowdown in demand from China, the world’s second largest oil consumer.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in July traded at USD98.17 a barrel during European morning trade, plunging 1.8%.
It earlier fell by as much as 2.25% to a daily low of USD97.65 a barrel.
The euro tumbled to a ten-week low against the U.S. dollar after ratings agency Fitch downgraded Greece’s credit ratings by three notches on Friday, while Standard & Poor’s said Italy’ rating was at risk of a downgrade.
News that Spanish Prime Minister Jose Luis Rodriguez Zapatero led his Socialist party to its worst defeat in more than 30 years in local elections over the weekend raised concerns about how the country will address its debt problems.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.72% to hit 76.33, after earlier rising to a seven-week high of 76.39.
A stronger dollar saps demand for raw materials as an alternative investment and makes commodities priced in the currency more expensive in terms of other monies.
Meanwhile, a preliminary reading of the Markit/HSBC Chinese manufacturing purchasing managers index fell to a 10-month low of 51.1 for May compared with a final reading of 51.8 in April, data on Monday showed.
China is the world’s second largest crude oil consumer, with the International Energy Agency forecasting that China will account for approximately 40% of global oil demand growth in 2011.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for July delivery tumbled 1.85% to trade at USD110.28 a barrel, up USD12.11 on its U.S. counterpart.