Oil slips on euro zone debt woes, dollar
Energi ; (Reuters) – Oil prices fell on Monday, pressured by a weaker dollar and erasing early gains as optimism over a debt bailout for Ireland gave way to concerns that financial problems would spread to other euro zone countries.
U.S. gasoline futures also slumped, extending the pressure on crude futures amid expectations that refinery restarts and imports from Europe will relieve tight supplies in the New York Harbor region, the delivery point for the U.S. gasoline futures contract.
U.S. crude for January delivery fell $1.22 to $80.75 a barrel at 12:47 p.m. EST (1747 GMT).
In London, ICE January Brent crude fell $1.20 to $83.14 a barrel.
“Crude oil is down in reaction to the dollar, which is firmer,” said Phil Flynn, analyst at PFGBest Research in Chicago.
“There is concern about contagion in the euro zone, and that’s keeping the market on edge. But volume is light ahead of the Thanksgiving holiday.”
The euro slumped against the dollar as optimism over an Irish bailout faded, prompting a euro retreat from a one-week high reached earlier in the session on news of the rescue deal.
The European Union and International Monetary Fund agreed on Sunday to help bail out Ireland with loans to tackle its banking and budget crisis after the country formally requested aid. The deal is expected to total 80 billion to 90 billion euros ($109.8-$123.6 billion).
A stronger dollar typically pressures oil and commodities prices as it caps investor appetite for riskier assets and boosts the value of greenbacks paid to producers for dollar-denominated oil while making it more expensive for consumers with other currencies.
In addition to the problems in Europe that could threaten oil demand, oil investors remain cautious amid concerns China will do more to cool inflation even after last week’s increases in bank reserve requirements
“There are also views that the bank reserve hikes, which China has introduced recently, are not enough to curb inflation,” the Mizuho Corporate Bank said in a research note.
China is the world’s No. 2 oil consumer and any slowdown in its economy could dampen oil demand growth.
Copper prices also fell, on lower imports from top metals consumer China and on the Irish bailout fluctuations.
U.S. equities also were pressured by the turmoil of the Irish bailout deal.