Oil Prices Slide on Heels of Japan's Currency Action

Reuters

Oil prices fell in choppy trading Monday as the dollar rose against the yen after Japan intervened in the market to stem the rise of its currency and with crude futures still on pace to post monthly gains.

The U.S. dollar climbed to a three-month high against the yen after Japan's latest intervention, its third this year and less than three months after the previous, coming only days before a Group of 20 leaders' summit in France.

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The euro weakened against the greenback and the dollar index strengthened against a basket of currencies. A stronger dollar can pressure oil by making dollar-denominated commodities more expensive for consumers using other currencies.

"This morning, it is the Japanese intervention in the foreign exchange market. On the macro front, it is a big week this week," Olivier Jakob with Petromatrix said.

ICE Brent December crude fell 64 cents to $109.27 a barrel by 11:39 a.m. (1539 GMT), having slipped as low as $108.40 intraday and remaining on track to post a 6 percent monthly gain, biggest since April.

U.S. December crude fell 85 cents to $92.47 a barrel, after falling to $91.36, but still on track to post a 16-percent monthly gain, biggest since May 2009.

Brent's premium to its U.S. counterpart strengthened slightly and was above $16 a barrel.

Crude trading volumes were low, with U.S. crude 76 percent below its 30-day average nearing the noon hour in New York and Brent 59 percent below its 30-day average.

Some volatility was expected after MF Global Holdings Ltd, the futures broker run by former Goldman Sachs chief Jon Corzine, filed for Chapter 11 bankruptcy.

Investor interest this week includes a U.S. Federal Reserve two-day meeting ending Wednesday, a European Central Bank press conference Thursday, and a G20 meeting mid-week, all in the aftermath of the latest effort to deal with the euro-zone debt crisis.

Friday will bring the release be key U.S. October nonfarm payroll employment numbers.U.S. stocks fell at the open as the dollar's strength weighed on commodity prices and limited bids on other risky assets and as last week's euphoria over Europe's plan to tackle its debt problems waned.

Lack of detail on the euro zone's rescue plan had bank shares leading European shares lower, though the broader market was on course to snap a five-month losing streak.