Oil prices fell below $75 a barrel Monday as the dollar strengthened and several OPEC ministers said they don't expect their group to change production levels at a meeting later this month.
By early afternoon in Europe, benchmark crude for January delivery was down 67 cents to $74.80 in electronic trading on the New York Mercantile Exchange. The contract lost 99 cents to settle at $75.47 on Friday.
Top oil officials from Libya, Kuwait, Algeria and Qatar said Saturday that the Organization of Petroleum Exporting Countries, which supplies about 35 percent of the world's crude, will likely leave output levels unchanged at the group's next policy meeting on Dec. 22.
Saudi Arabia's oil minister, Ali Naimi, said Saturday that oil prices, which have bounced around the high $70s for about two months, were "perfect."
"Crude oil prices have been in a downtrend since Oct. 21," said a report from Sucden Research in London. "Given the high levels of crude inventories as well as views that OPEC will keep the output quotas unchanged ... it looks likely that fundamentals do not support higher crude oil prices."
Oil traders are also eyeing the U.S. dollar as some investors buy crude as a hedge against inflation and a weaker U.S. currency. When the greenback strengthens, however, oil becomes more expensive for investors holding other currencies, like the euro or the Japanese yen.
On Friday, crude fell to a seven-week low after the Labor Department said the unemployment rate fell to 10 percent in November from 10.2 percent a month earlier, sparking a rally in the dollar. On Monday, the euro was down to $1.4785 from $1.4851 on Friday, near its lowest point in about a month.
Analysts at U.S. energy consultancy Cameron Hanover said the dollar's rise was taking away "the best source of buying for the oil complex" and putting some of the focus back on the fundamentals of supply and demand.
"This could be the beginning of the end for the so-called 'carry' trade ... the whole process of borrowing money at negligible interest costs and then 'investing' it in anything with a market pulse," Cameron Hanover said. "It completely disregards supply and demand and it has been the guiding force behind higher prices in commodities in 2009."
Many experts say that the uncertainties of the economic recovery and the high inventories of crude and fuels in the United States do not justify oil prices near $80.
While Friday's unemployment figures were encouraging, analysts warned that its was too soon to judge their impact on oil consumption.
Olivier Jakob of Switzerland's Petromatrix said U.S. oil demand was still at least 2 million barrels a day lower than two years ago.
"The job losses are getting narrower but the number of unemployed remains astronomically high," Jakob said. "A lot still needs to happen before the situation moves from less bad to much better on the employment front and really starts to have an impact on U.S. oil demand."
In other Nymex trading in January contracts, heating oil fell 1.01 cents to $2.0167 and gasoline slipped 1.28 cents to $1.9622. Natural gas jumped 16.5 cents to $4.751 per 1,000 cubic feet.
In London, Brent crude for January delivery lost 46 cents to $77.06 on the ICE Futures exchange.
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