Oil falls below $79

Oil fell more than 2 percent to below $79 a barrel on Monday on concerns that a sluggish economic recovery will keep fuel demand low. Investors scaled back their commodities holdings following a recent rally for raw goods. Equities fell and the US dollar firmed against other currencies, after touching a 14-month low earlier on Monday.
"There is selling spread out among a broad array of commodities," said analyst Brad Samples of Summit Energy in Louisville, Kentucky. "The dollar is now up, after earlier being down, and that is helping to point crude oil lower," he added. US crude for December delivery fell 2.3 percent, or $1.82 a barrel, to settle at $78.68. Crude rose to a one-year high of $82 a barrel last week before falling in three consecutive days.
Brent crude fell $1.66 to settle at $77.26 a barrel. A stronger dollar makes oil costly for holders of other currencies. The dollar rallied 0.8 percent against a basket of foreign currencies as investors moved into more safe-haven assets like US Treasury bonds, and away from commodities. Speculation that a tax credit for first-time US homebuyers will not be extended helped to lift the dollar.
ISI Group said in a research note that the credit may be phased out. Caterpillar announced plans to permanently cut 2,500 jobs, after a slowing global economy curbed demand for its tractors and industrial equipment. US stock indices slid by 1 percent as investors questioned whether third-quarter corporate earnings were high enough to justify a recent rally in equities.
"The oil market is still focused on how the dollar and the stock markets are moving," said Phil Flynn, analyst at PFGBest Research in Chicago. Nigeria's main militant group reinstated a cease-fire on Sunday in the oil-producing Niger Delta to allow for peace talks. That could free up more oil exports from the conflict-torn region whose output has been curtailed this year.
Warm weather may translate to less heating oil demand in the United States, the largest consumer. US total heating demand will be nearly 23 percent lower than normal this week as temperatures average near to above normal in the Northeast and the Midwest, the National Weather Service projected on Monday. Crude fell in spite of a bullish research note from Goldman Sachs, which said oil may rise to $85 a barrel by the end of the year due in part to a rebound in diesel demand.