Global oil prices reversed a rally on Monday, with benchmark Brent returning to the red after a big hike in Saudi Arabia's monthly export prices was viewed as a signal OPEC's largest producer may be seeking to curb output.
State oil firm Saudi Aramco said it would raise the price of its flagship Arab light crude in December for customers in Asia and Europe, reversing some price cuts the previous month. It will cut prices for U.S. buyers.
The kingdom has signaled it was willing to put up with lower oil prices, and last month's big price cuts had triggered a deeper decline in global markets. The higher prices for December cargoes may now discourage buyers, some said.
Oil traders may see the latest price hikes as an indication that the Saudis are now "less worried about market share and more concerned about crude prices," said Joseph Posillico, senior vice president of energy derivatives at Jefferies LLC.
The U.S. dollar powered to a seven-year peak against the yen and a two-year high against the euro on Monday, extending gains after the Bank of Japan's latest stimulus and punishing oil and gold priced in the U.S. currency.
Although prices initially rose in midday trading, by late in the U.S. session both the U.S. and international contracts had retreated.
Brent was sharply lower, off more than $1 to near $84 per barrel. Earlier it had slipped below $85 as a stronger dollar punished oil and gold, commodities that are priced in the U.S. currency.
U.S. crude tumbled by more than 2 percent, ending down $1.76 at $78.78 per barrel.
The Organization of the Petroleum Exporting Countries pumped 120,000 barrels per day less crude oil in October, a Reuters survey showed on Friday, although overall supply stayed well above the cartel's output target of 30 million bpd.
Less oil from Nigeria and Angola brought total OPEC supply to an average of 30.72 million bpd in October, down from a revised 30.84 million bpd in September.