Forexpros – Crude oil futures declined on Monday, trading close to a six-week low as a broadly stronger U.S. dollar and concerns over the economic outlook in the euro zone dragged down prices.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in February traded at USD93.50 a barrel during European morning trade, shedding 0.27%.
It earlier fell by as much as 0.85% to trade at a daily low of USD92.78 a barrel. Prices fell to a six-week low of USD92.51 a barrel on Friday.
Crude’s losses came as the dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, gained 0.2% to trade at 80.86.
Oil prices typically weaken when the U.S. currency strengthens as the dollar-priced commodity becomes more expensive for holders of other currencies.
Demand for the greenback was boosted after reports emerged that long-time North Korean leader Kim Jong il died, fuelling concerns over potential geopolitical instability across the region.
Crude prices came under additional pressure after ratings agency Fitch announced Friday that it lowered France’s rating outlook and put six other euro zone members, including Italy and Spain, on review for a downgrade.
Moody’s Investors Service also downgraded Belgium two notches to Aa3, citing “increasing risks due to deteriorating market funding conditions”.
Furthermore, European Central Bank President Mario Draghi told the Financial Times over the weekend he was sticking with his opposition to intervening in the bond markets and buying up sovereign debt in order to ease the region’s ongoing debt crisis.
Meanwhile, investors eyed a conference call of euro zone finance ministers later in the day about the draft text of a new fiscal plan agreed earlier this month. Talks were also to include the size of individual loans to the International Monetary Fund.
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 region accounted for nearly 16% of global oil consumption in 2010, according to data from British Petroleum.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for February delivery dipped 0.1% to trade at USD103.26 a barrel, with the spread between the Brent and crude contracts standing at USD9.76 a barrel.
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