Tokyo: Oil fell more than a dollar toward $68 a barrel on Monday as a rebound in the beaten-down US dollar and nagging concerns that prices may have run ahead of market fundamentals extended last week’s late sell-off.
The US currency rallied sharply against a basket of currencies on Monday as investors covered short positions following last week’s 2% slide to its lowest in a year, fuelled by funds flowing into riskier assets such as stocks and commodities and the drop in US Treasury yields.
The dollar’s reversal on Monday sent US crude for October delivery tumbling 94 cents to $68.35 a barrel by 0229 GMT, off its session low of $68.05 earlier, as broader commodity markets once again traded inversely to the greenback.
London Brent crude fell 68 cents to $67.01 a barrel.
“Oil fundamentals are unchanged, but the euro is down slightly and crude is down similarly,” said Ken Hasegawa, a commodity derivatives sales manager at broker Newedge in Tokyo. “But as a trend, we may see dollar weakness for a while.”
The dollar index, a gauge for the greenback’s performance against other six major currencies, rose 0.4% to 76.917, off its one-year low of 76.457 struck on Friday.
Oil fell nearly 4% toward $69 a barrel on Friday, paring most of its gains earlier in the week, as US equities fell pray to profit-taking following five days of gains, raising concerns about the sustainability of its recent rally and the strength of an economic recovery in the US.
“With demand still weak, it’s not surprising to see some follow-through selling today,” said Toby Hassall, a commodities analyst at CWA Pty Ltd in Sydney.
“The pre-emptive nature of the oil markets in the past six months may be diminishing as investors now wait for fundamentals to catch up with expectations.”
Separately, Kuwait’s oil minister said late on Thursday Opec members’ compliance to quotas had fallen to 68%, from 77% in May, state news agency KUNA reported shortly after the cartel agreed to maintain output quotas for now.