Crude Falls More Than $1 as Greenback Strengthens

U.S. crude fell more than $1 on Monday, edging below $78 a barrel, and Brent crude also dropped with both reversing early gains as U.S. dollar strength outweighed worries about conflict in Libya and Ukraine.

The dollar rose 0.18 percent against a basket of currencies , regaining ground after dropping in European trade. Recent strength has made oil and other commodities priced in dollars more expensive for holders of other currencies, suppressing demand.

Persistent concerns about a global surplus of crude and slowing growth have pushed oil prices down nearly 30 percent since June.

U.S. front-month crude futures fell as low as $77.20 before settling at $77.40 per barrel, down $1.25. Earlier in the session, the contract touched a high of $79.85.

Brent crude also reversed early gains to settle down more than $1 per barrel at $82.34. The spread between the two global benchmarks <CL-LCO1=R> was steady at $4.95.

"There's been a lot of pressure of WTI (U.S. crude) today. There was a big huge reversal as we did see the dollar turn around," said Phillip Streible, senior market strategist at RJO Futures in Chicago. "I think we will probably consolidate around this range. Everyone is looking ahead to the OPEC meeting."

The Nov. 27 meeting of the Organization of the Petroleum Exporting Countries is a key focal point for a market awash with supply, but so far the cartel has given no clear indication that it will cut output.

Kuwaiti Oil Minister Ali al-Omair said on Monday that OPEC was unlikely to cut production.

Intraday profit-taking meant crude's earlier gains on disruptions in Libya and heightened military activity in Ukraine were short-lived.

"When rallies happen, they are being taken as an opportunity to sell," said Oliver Sloup, director of managed futures at iiTrader in Chicago.

In Libya, an armed brigade from Operation Dawn, one of the factions backing the rival government, took control of the country's largest oilfield, El Sharara, a commander in charge of security at the site said. If confirmed, it would be the first attempt to take physical control of oil production by the rival government.

Meanwhile in Ukraine, government forces shelled the pro-Moscow stronghold of Donetsk on Sunday, putting a fragile cease-fire under pressure. An escalation of tensions in Ukraine could disrupt Europe's gas supplies from Russia, potentially increasing demand for oil.

(By Nia Williams; Additional reporting by Barani Krishnan in New York, Sam Wilkin in London and Keith Wallis in Singapore; editing by Jason Neely, G Crosse, James Dalgleish and Marguerita Choy)