MW: Oil touches 2-month low as dollar strength weighs
By Moming Zhou, MarketWatch
NEW YORK (MarketWatch) -- Crude futures fell Monday, briefly hitting their lowest level in nearly two months, as the dollar strengthened on concerns that the U.S. may tighten interest rates, pressuring dollar-denominated commodities prices.
Ideas that the Federal Reserve could hike interest rates next year sent the U.S. currency higher and stock index futures lower ahead of a speech from the Fed's chairman. Other commodities such as gold also declined.
Moving lower for a third straight session, January crude was last down 70 cents, or 0.9%, at $74.77 a barrel in early North American electronic trading. It fell to $74.56 earlier, the lowest intraday level for a front-month contract since Oct. 13. Crude has risen nearly 70% this year.
"The government may be ready to implement policies that raise interest rates and eventually boost the dollar," said Brian Niemiec, an analyst at Susquehanna Financial Group. "The market may be concerned that commodity prices may have surged too far too fast."
"Meanwhile, overall fundamentals across the energy space have yet to materially improve with excess supply and reduced demand still lingering as an overhang."
In currencies trading Monday, the dollar index (DXY 75.97, +0.29, +0.38%) was last up 0.1% at 75.991. It surged more than 1% Friday after the Labor Department released a surprisingly upbeat jobs report.
The greenback and commodities prices have had a strong inverse relation in recent weeks. Other commodities also moved lower Monday, with gold falling for a second session to below $1,150 an ounce.
Also in energy trading, January gasoline sank 0.7% to $1.9604 a gallon, January heating oil slid 0.5% to $2.0176 a gallon, and January natural gas rose 3.6% to $4.752 per million British thermal units.
