NEW YORK (Reuters) - Oil prices dropped sharply on Monday, extending a slide from last week’s record to 10 percent amid a recovery in the U.S. dollar and lingering worries over slowing energy demand.
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.
U.S. crude futures CLc1 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 crude LCOc1 fell 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.
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 & Co had quintupled its offer to buy Bear Stearns Cos, 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.
Uncertainty over world energy demand growth has kept OPEC from raising production to lower high oil prices, despite calls from consumer nations for additional output.
U.S. Vice President Dick Cheney, who visited Saudi Arabia last week, said on Monday, however, that the OPEC heavyweight had kept its promise to increase oil production capacity over the past three years.
“They said they would add 2 million barrels a day in production over the next four or five years, through the end of (2009), and they’ve kept their word,” Cheney said.
President George W. Bush visited Saudi Arabia in January, calling for OPEC to increase supply to the market, but the exporters’ group decided to hold production steady.
Additional reporting by Fayen Wong in Sydney and Ikuko Kao in London; Editing by Christian Wiessner