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Markets

Oil prices drop on strong dollar

Published Updated

imageLONDON: Global oil prices fell Monday on the back of the strong dollar and plentiful supplies, on the eve of key manufacturing data from China, the world's top energy consumer.

Brent North Sea crude for delivery in November slid 72 cents to stand at $97.67 a barrel in London deals.

US benchmark West Texas Intermediate for October lost 43 cents to $91.98 a barrel.

"The strong dollar currently weighs heavily on market sentiment in the oil market," said Myrto Sokou, senior research analyst at the Sucden Financial brokerage in London.

The dollar had surged higher against rival currencies last week on hints from the US Federal Reserve is closer to tightening monetary policy than other major central banks.

The rising greenback makes dollar-priced commodities more expensive for buyers using weaker currencies. That tends to dent demand and price levels.

The oil market was also pushed lower on plentiful global crude supplies, which have been boosted by the US shale energy boom, while sentiment was dampened by demand fears in Europe and China.

"Plentiful non-OPEC supply -- especially in the United States -- in combination with concerns about demand in Europe and China are continuing to weigh on" prices, said Commerzbank analysts.

Looking ahead, traders are eagerly awaiting Tuesday's release of HSBC's flash September purchasing managers index (PMI) for the Chinese manufacturing sector for a key reading on the health of China's economy.

Desmond Chua, analyst at CMC Markets in Singapore, said the Chinese PMI data comes "after a bout of economic reports came in below expectations".

He added that another poor reading "will underscore weakness in the Chinese economy".

Singapore's United Overseas Bank (UOB) added that the "market is expecting a further decline in the PMI to 50.0 from 50.2 in August after having retreated from 51.7 in July".

The index tracks manufacturing activity in China's factories and workshops and is a closely watched indicator of the health of the economy. A reading above 50 indicates growth.

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