Oil fell on Monday as the dollar firmed and on prospects Opec could decide to raise crude output when it meets in February. US oil settled 64 cents lower at $90.63 a barrel, off earlier lows of $89.49. London Brent crude for February delivery settled down 40 cents at $91.29 a barrel.
The drop came after a snowstorm blasted the US Northeast, the world's biggest heating oil market, over the weekend. "Crude prices are down as the storm has passed and there is news from the Algerian oil minister that Opec may raise output at its February meeting," said Phil Flynn, an analyst at Alaron Trading in Chicago.
Worries about supplies as the Northern Hemisphere headed into winter helped send US crude to near $100 a barrel in late November. Despite the concerns of consumer nations, the Organisation of the Petroleum Exporting Countries decided on December 5 to keep output steady.
But Algeria's oil minister, Chakib Khelil, said on Monday Opec might increase output at a February 1 meeting, if the market needed more crude. Khelil, who becomes Opec president on January 1, added the cartel could keep production steady, if the winter was not harsh and the US economy weakens further.
"I wouldn't exclude the possibility of increasing production, if, of course, the market wants it, but for the moment, I think we have sufficient supply," he said on the sidelines of an energy conference in Cyprus. Gains in the dollar, which has held an inverse relationship to oil in recent months, also weighed on crude prices on Monday. Oil has tumbled from a record $99.29 a barrel on November 21 as the credit crunch showed signs of hurting fuel demand in top consumer the United States.
A surge in wheat prices above $10 for the first time added to inflation worries. US stocks extended losses, sending the Nasdaq down 2 percent, as investors feared the threat of rising inflation and fallout from the housing slump would dim the outlook for corporate profits.
"The economic outlook seems to be driving it at the moment, more so than supply/demand data," said Simon Wardell, an oil analyst at consulting firm Global Insight. "The market is looking for any sort of clue about whether we are going see the current financial problems spread to the wider economy and cause more of a downturn next year."
SINGAPORE: Oil was littled changed on Monday following a $3.00 slide over two days, as a US winter storm and Turkish bombing of Kurdish rebels in northern Iraq countered concerns about a weaker US economy.
US light, sweet crude for January delivery which expires on Tuesday, reversed earlier gains to stand 2 cents lower at $91.25 a barrel by 0755 GMT, adding to losses of nearly $1.00 on Friday and more than $2.00 the day before. London Brent crude rose 12 cents to $91.81 a barrel.