UPDATE 6-Oil eases on dollar gain, EU economy

Mon Oct 31, 2011 2:24pm GMT

* Japan intervenes on yen, pushing dollar higher

* Fundamentals seen weak on struggling developed economy

* Euro zone, G20 meeting, surprise U.S. cold snap eyed (Updates prices)

By Ikuko Kurahone

LONDON, Oct 31 (Reuters) - Oil prices fell on Monday, with Brent slipping below $109 a barrel, as the dollar rose against the yen after Japan intervened in the markets to stem the rise of its currency.

Investors and analysts said the oil market may be swayed by a spate of economic events this week including a U.S. Federal Reserve meeting on Wednesday, a European Central Bank press conference on Thursday and a G20 meeting mid-week amid continued concerns over the euro zone debt crisis.

Brent crude LCOc1 fell $1.29 to $108.68 a barrel by 1414 GMT after closing at $109.91 on Friday.

U.S. crude CLc1 fell $1.53 to $91.79 per barrel.

The dollar climbed to a three-month high against the yen earlier on Monday after Japan's intervention. The U.S. dollar index also rose against a basket of currencies.

A stronger dollar makes oil more expensive in other currencies.

"This morning, it is the Japanese intervention in the foreign exchange market. On the macro front, it is a big week this week," Olivier Jakob with Petromatrix said.

Jakob also said trading of the price spreads between U.S. crude and Brent and of the forward curve was likely to continue to influence the market this week.

In the middle of last week U.S. crude rallied on trading of its spread with Brent, while Brent was held back as backwardation of the curve flattened. Both got a brief boost from a deal struck by the euro zone to recapitalise its banks and strengthen its rescue fund.

But persistent doubts about the plan have put pressure on the market, and the outright price of Brent crude ended Friday little changed from the week before.

"Even if a massive financial crisis appears to have been avoided, the economic outlook looks very weak for the next few quarters," Christophe Barret, Global Oil Analyst with Credit Agricole CIB said in a research note. "Oil demand should remain lacklustre, on high prices and mediocre economic activity."

Consumer prices in the 17-nation euro area stayed at 3 percent in October, according to a first estimate by the European Union's statistics office Eurostat, roughly in line with a 2.9 percent forecast in the Reuters poll of economists.

Eurostat in a separate report said the jobless rate in the euro zone rose slightly to 10.2 percent in September from a revised 10.1 percent in August.

OPEC

A reasonable price for crude was between $80 and $100 a barrel, said Minister Mohammed bin Dhaen al-Hamli, the oil minister of OPEC producer the United Arab Emirates, at an oil conference in Singapore.

OPEC will meet in December to review its output policy amid a faster-than-expected recovery in exports from war-torn Libya.

Richard Jones, deputy executive director of the International Energy Agency (IEA), said the agency would not want OPEC to cut its output target. The agency represents developed nations, which are mostly net oil consumers.

Nobuo Tanaka, former executive director of the IEA, said an oil price of $70 to $80 was just right but that prices of $100 or more would derail global economic growth, just as the record prices preceding the 2008 financial crisis did.

Over the weekend, Spain and Portugal called for the United States and other G20 powers to take action to help contain the fallout from the European debt crisis at the G20 summit, set for Cannes, France, on Nov. 3 and 4.

In the United States, mixed economic data did little to support oil prices last week. The market will focus on jobs data later this week to see any signs of economy improvement in the world's largest economy.

The market was also eyeing weather in the U.S. Northeast, which was hit with an early winter storm, leaving more than 3 million households without power on Sunday and killing at least eight people. (Reporting by Rebekah Kebede in Perth and Ikuko Kurahone in London; Editing by Anthony Barker)

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