Oil falls to near $81 as US dollar rebounds

AP News
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Posted: Oct 18, 2010 7:28 AM
Oil falls to near $81 as US dollar rebounds

Oil prices fell to near $81 a barrel Monday as a monthlong rally lost momentum as the U.S. dollar recovered some ground.

By early afternoon in Europe, benchmark oil for November delivery was down 11 cents to $81.14 a barrel in electronic trading on the New York Mercantile Exchange. The contract lost $1.44 to settle at $81.25 on Friday.

Oil broke out of a yearlong trading range between $70 and $80 last month, fueled by a rally in global stock markets and a falling dollar. But equities have faltered in the last few trading sessions and a recovering dollar is making oil more expensive for investors with foreign currencies.

"The previous price increase was driven mainly by financial investors and was not based on a tightening of the fundamental supply situation," said analysts at Commerzbank in Frankfurt. "Already during the past days, there were indications that the oil price increase would gradually run out of steam when it could hardly benefit any longer from the continuing weakness of the U.S. currency."

The euro fell to $1.3914 on Monday from $1.3963 on Friday while the British pound slipped slightly to $1.5887 from $1.5985. All major Asia stock markets were down Monday, while mostly rising slightly in Europe.

"Investors sold against weakness in equities and a resurgence in the dollar," Cameron Hanover said in a report. "The economic data is not helping."

Investors will be closely watching how a high U.S. unemployment rate may have affected corporate earnings. Apple Inc., Citigroup Inc., Bank of America Corp. report third quarter results this week.

Still, some analysts suggested $80 could take its place at the bottom of a new trading range, instead of the top.

"The fundamentals still do not look strong, but suddenly $80 a barrel looks like it may be becoming a new support level rather than a resistance line," said a report from KBC Energy Economics in London.

In other Nymex trading in November contracts, heating oil fell 0.09 cent to $2.2299 a gallon and gasoline rose 0.91 cent to $2.1129 a gallon. Natural gas slid 5.1 cents to $3.484 per 1,000 cubic feet.

In London, Brent crude fell 7 cents to $82.38 a barrel on the ICE Futures exchange.

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Associated Press writer Alex Kennedy in Singapore contributed to this report.