Oil prices fell to their lowest in more than six years on a combination of factors including worries over tepid demand on weak global economic growth and the strength of the dollar.
Light sweet crude for September delivery pared early morning gains to end $1.07 or 2.5% lower at $42.30 a barrel on the New York Mercantile Exchange.
Based on the most active contracts, this is the lowest the US benchmark has ended since March 3 2009.
Brent Futures, the global benchmark, shed 44 cents or 0.9% to end at $49.22 a barrel on the London based ICE Futures Exchange.
“We are now trading at levels not seen since the depths of the great recession,” Stephen Schork, president of research consultancy The Schork Group, told the Wall Street Journal.
“The overall trend in this market is very bearish.”
The dollar advanced against a basket of foreign currencies on Monday after the department of commerce reported a growth in US retail Sales for July.
Also adding to the dollar’s strength was data from the labor department showing that the number of new people filing for unemployment benefits fell sharply for the same period.
The better than expected economic data reaffirmed expectations that the Federal Reserve would commence its monetary tightening policy as early as September.
A stronger dollar is bullish for the demand of commodities denominated in dollars like oil as it makes them more expensive to holders of foreign currencies.
“It’s the first time the dollar has been able to gather some strength since the Chinese currency situation slapped us in the face. While dollar weakness may have served as support for crude oil in the last two days, it’s coming back to haunt the market today,” Robert Yawger, director of energy futures at Mizuho Securities, told Market watch in a phone interview.
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