Oil falls below $79
Prices fall for the third day after surging to a 2009 high last week as economic jitters weigh on the market.
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| Click the chart for current oil prices. |
NEW YORK (Reuters) -- Oil fell more than 2% to below $79 a barrel 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 U.S. dollar firmed against other currencies, after touching a 14-month low earlier Monday.
"There is selling spread out among a broad array of commodities," said analyst Brad Samples of Summit Energy in Louisville, Ky.
"The dollar is now up, after earlier being down, and that is helping to point crude oil lower," he added.
U.S. crude for December delivery fell 2.3%, 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.
A stronger dollar makes oil costly for holders of other currencies. The dollar rallied 0.8% against a basket of foreign currencies as investors moved into more safe-haven assets like U.S. Treasury bonds, and away from commodities.
Speculation that a tax credit for first-time U.S. 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 (CAT, Fortune 500) announced plans to permanently cut 2,500 jobs, after a slowing global economy curbed demand for its tractors and industrial equipment.
U.S. stock indices slid by 1% 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 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. U.S. total heating demand will be nearly 23% lower than normal this week as temperatures average near to above normal in the Northeast and the Midwest, the National Weather Service projected Monday.
Crude fell in spite of a bullish research note from Goldman Sachs (GS, Fortune 500), which said oil may rise to $85 a barrel by the end of the year due in part to a rebound in diesel demand. 
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