MW: Oil futures drop below $81 on strong dollar, weak demand
FRANKFURT (MarketWatch) -- Oil futures dropped below $81 a barrel on Monday, as the U.S. dollar's strength and worries over weak demand weighed on prices.
Crude oil for April delivery fell 60 cents, or 0.7%, to $80.64 a barrel in electronic trading on Globex.
Energy traders are awaiting U.S. economic data, which includes the Empire State and home-builders index for March as well as industrial production for February.
Pressuring oil prices on Monday was the dollar's rise against its major rivals.
The dollar index (DXY 80.06, +0.22, +0.28%) , which measures the U.S. unit against a trade-weighted basket of six major currencies, rose to 80.084 in recent trading, up from 79.830 late Friday.
Dollar strength typically weighs on dollar-denominated commodities because it makes them more expensive for holders of other currencies.
Oil prices dropped on Friday and posted a slight decline for last week after the University of Michigan said U.S. consumer sentiment fell in March.
The economic data overshadowed the International Energy Agency's upward revision of its estimate for oil demand this year. The Paris-based IEA revised up by 70,000 barrels a day its oil demand forecast for both 2009 and 2010, citing strong demand from China and other emerging economies.
Members of the Organization of the Petroleum Exporting Countries will meet on Wednesday in Vienna. OPEC isn't expected to make any changes to its daily output quotas. Read more on the OPEC meeting.
"One problem is the falling level of quota compliance," said analysts at Commerzbank AG in a note to clients. "Overproduction has so far been absorbed by the rising demand in emerging countries."
"In the U.S. and Europe, the demand for oil has not really recovered to any significant extent up to now," they said.
