Forexpros – Crude oil futures pulled back from a 15-week high on Monday, as a broadly stronger U.S. dollar and lingering concerns over Italy’s debt crisis weighed on appetite for riskier assets.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in January traded at USD97.49 a barrel during U.S. morning trade, tumbling 1.42%.
It earlier fell by as much as 1.66% to trade at a two-day low of USD97.25 a barrel.
Market sentiment was dented after Italy auctioned EUR3 billion of five-year government bonds at an average yield of 6.29% earlier in the day, up from a yield of 5.32% in a previous sale last month.
The auction, which was viewed as a key test of investor confidence in Italian debt, was the first after former European Commissioner Mario Monti was appointed to head a new government charged with implementing urgent reforms.
Adding to nervousness over the region’s debt crisis, Spanish government debt came under broad selling pressure ahead of next week’s general elections, with the 10-year yield rising above 6.0% for the first time since early August.
Italy and Spain are the euro zone’s third and fourth largest economies. The recent surge in their respective borrowing costs fuelled fears that the European sovereign debt crisis was spreading to the region’s core economies.
Crude prices came under additional pressure after official data showed that industrial output in the euro zone fell at the fastest pace in two-and-a-half years in September, dropping 2%, slightly less than expectations for a 2.2% decline, but erasing all of the previous month’s 1.4% gain.
The weak data underlined concerns over the threat of an economic downturn in the single currency bloc. The euro zone accounted for nearly 16% of global oil consumption in 2010, according to data from British Petroleum.
The news saw the U.S. dollar advance against the euro, while the dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.72% to trade at 77.66.
Dollar-denominated oil futures contracts tend to fall when the dollar rises, as this makes oil more expensive for buyers in other currencies.
Crude prices were boosted during the Asian session after preliminary data showed that Japan’s economy grew by 1.5% in the third quarter, broadly in line with expectations. The gain comes after three quarters of contraction, and indicates an annualized rate of growth of 6.0%.
Japan is the world’s third largest crude oil consumer, after the U.S. and China.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for December delivery dropped 1.43% to trade at USD111.31 a barrel, with the spread between the Brent and crude contracts standing at USD13.82 a barrel.
Forexpros
