Oil falls 2 percent to below $80 on firmer dollar

By Edward McAllister

NEW YORK (BestGrowthStock) – Oil prices fell nearly 2 percent to below $80 a barrel on Monday, pressured by a stronger dollar and concerns that potential credit tightening in China might curb energy demand in the world’s second-largest oil consumer.

Oil markets also awaited this week’s U.S. Federal Reserve meeting to see if it remains committed to low interest rates and the OPEC ministers’ meeting in Vienna where they will consider output policy.

U.S. crude for April delivery fell $1.57 to $79.67 per barrel by 12:46 p.m. EDT (1646 GMT), after dropping as low as $79.13, the lowest level since March 2. London Brent crude traded down $1.50 at $77.89 a barrel.

“It’s all about the dollar’s being up, pressuring oil,” said Phil Flynn, analyst at PFGBest Research in Chicago.

The euro slid against the dollar due to a lack of progress on a financial aid package for debt-strapped Greece. A stronger dollar pressures oil and other commodities, making them more expensive for other currency holders. (USD/: )

“People are also watching what the Fed might say on interest rates at its Tuesday meeting,” Flynn added. “They are also concerned about that China might do to rein in hot inflation.”

The U.S. Federal Reserve is expected to hold benchmark rates near zero and reiterate its pledge to keep them low for an “extended period” due to the weak U.S. jobs market and nagging doubts about the economic rebound.

Consumer inflation in China soared to a 16-month high according to data last week, prompting more talk of policy tightening, which analysts say could dent oil demand.

China’s central bank is seen raising bank reserve requirement ratios as early as this week, while some say it may wait before raising benchmark deposit and lending rates.

Wall Street stocks fell on concerns about the effect any tightening in China might have on the global economy. (.N: )

U.S. industrial output edged up 0.1 percent in February, as expected, likely restrained by severe storms that hit part of the country, the Federal Reserve said.

Oil markets were relatively unmoved after a separate report showing manufacturing in New York state fell by less than forecast in March as employment in the sector rose to its highest level since October 2007.

But, as U.S. consumers are buying more and companies appear to be on the verge of hiring again, Fed policymakers may ponder how long to keep their ultra-low rate pledge.

On the supply front, the Organization of the Petroleum Exporting Countries, which pumps at least one in every three barrels of oil, meets in Vienna on Wednesday to discuss production policy.

OPEC ministers have said there is no need to change output targets with oil prices above their preferred range and demand expected to pick up in the second half.

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(Additional reporting by Chris Baldwin in London, Robert Gibbons and Gene Ramos in New York, Jennifer Tan in Singapore; Editing by David Gregorio)

Oil falls 2 percent to below $80 on firmer dollar