Strong dollar weighs down oil

Weighing on prices: a stronger US dollar caused oil prices to slip on Tuesday

Oil prices slipped on Tuesday on a stronger US dollar, continuing uncertainty about the resolution of the euro zone's debt crisis and the collapse of MF Global Holdings.

The US-based futures brokerage MF Global filed for bankruptcy protection following bad bets on euro zone debt. Its meltdown in less than a week made it the biggest US casualty of Europe's debt crisis and the seventh-largest bankruptcy by assets in US history.

"As cooler heads prevail and look around and actually start analysing the euro zone situation, they realise we still got a ways to go," said Tony Nunan, a risk manager with Tokyo-based Mitsubishi.

"We are going to drift lower based on a correction from the euphoria from the EU summit last week until we get new news from either the FOMC, the G20, or finally on Friday, from the US non-farm payroll."

But positive news from the US Federal Reserve meeting ending Wednesday, the G20's mid-week summit, or US payroll data on Friday could turn markets around, Nunan said.

"If the US Federal Reserve comes out with some kind of indication that they are willing to do another round of quantitative easing -- that could easily get the market going again."

ICE Brent December crude fell 33 cents to $109.23 early on Tuesday. Brent posted a 6.6% gain for October, biggest since April, and after slumping 10.5% in September.

US December crude fell 39 cents to $92.80 per barrel. US crude surged 17.7% in October, the biggest percentage gain since May 2009.

On Monday, oil prices settled lower in thin trading, which brokers and analysts attributed to MF Global's collapse. The CME Group said it suspended MF Global as a member of the exchange.

A firm dollar also weighed on oil prices. The greenback pulled back from its three-month high against the yen as the impact of Japan's currency intervention waned, but was still stronger against a basket of currencies .

Opec oil output fell in October as reduced supplies from Iraq, Nigeria, Saudi Arabia and Angola offset rising Libyan supply, according to a Reuters survey.

The International Energy Agency does not want Opec to cut output at its December meeting because the IEA expects demand for Opec oil will grow by half a million barrels per day in 2012 above the group's September output.

US commercial crude oil are forecast to have risen for the second consecutive time last week as imports continued to rebound, a preliminary Reuters poll of analysts found on Monday.

The industry group American Petroleum Institute's inventory report is due on Tuesday, with the US Energy Information Administration's report following on Wednesday.


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