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Oil Extends Slide on Dollar, Demand Worries

Reuters
Monday, 24 Mar 2008 | 3:17 PM ET

Oil prices fell more than a dollar Monday, extending a slide from last week's record to nearly 10 percent amid a recovery in the U.S. dollar and lingering worries over slowing energy demand.

Oil Refinery in California
Oil Refinery in California

Dealers said Monday's losses were tempered somewhat by better than expected U.S. homes sales data that lifted Wall Street stocks and forecasts of unusually cold weather in the U.S. Northeast and European heating markets.

Light sweet crude settled down 98 cents at $100.86 after touching a low of $99.95, bringing them further below last Monday's $111.80 peak. London Brent crudefell 52 cents to $99.86 a barrel.

Traders and analysts said a recovery in the U.S. dollar from recent lows against the euro was pressuring the nominal price of virtually all dollar-denominated commodities, including crude.

The U.S. dollar rose against the euro Monday, keeping it off its recent lows and pressuring the nominal prices of dollar-denominated commodities.

Meanwhile, dealers continued to watch for signs the U.S. economic slowdown was softening energy demand after government data last week showed total petroleum consumption was running about 3.2 percent below last year.

"We suspect that the correction in commodities still has some ways to go, and we could push somewhat lower from here," Edward Meir with MF Global said in a research note.

The weakness in oil was tempered by a recovery in U.S. stock markets, however, after a report showed U.S. February existing home sales rose by more than expected.

U.S. stocks also got a boost from news that JPMorgan Chase had quintupled its offer to buy Bear Stearns, which was hit by the subprime mortgage loan crisis.

Adding support, demand for heating oil in the U.S. will be 3.5 percent above normal this week, according to the National Weather Service. Sub-zero temperatures have also hit northwest Europe.

Support also came from data showing China, the world's second largest oil consumer, raised crude purchases by 18.1 percent over a year earlier to match a daily record made in April 2007 at 3.6 million barrels a day.

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