Oil Sags on Supply Concerns
Oil prices fell on Monday on fears that record Iraqi crude exports and growing U.S. output could undermine OPEC's efforts to reduce supply, while sterling slumped on comments by British Prime Minister Theresa May suggesting what could be an aggressive exit from the European Union.
Sterling was the big mover in the currency market, falling nearly 1 percent against the dollar to more than two-month lows after May's remarks. May said she was willing to sacrifice the country's single-market membership for more control over its borders.
U.S. Treasury yields, meanwhile, retreated in line with British bond yields after May's comments.
The drop in oil prices weighed on energy stocks on Wall Street as the Dow Jones Industrial Average moved further from hitting the historic and widely awaited 20,000 mark.
"With the big numbers coming out of the southern port of Basra for December... it's implying that Iraq may be the first big crack in the wall of the OPEC agreement," said Robert Yawger, director of the futures division at Mizuho Securities USA.
OPEC agreed in November to cut supplies for the first time since the global financial crisis more than eight years ago.
In early afternoon trading, Brent crude fell $1.66, or 2.87 percent, at $55.44 a barrel, while U.S. crude futures slid slid 2.96 percent to $52.39 per barrel.
In the U.S. equity market, the Dow Jones Industrial Average fell 46.09 points, or 0.23 percent, to 19,917.71, while the S&P 500 was down 3.68 points, or 0.16 percent, at 2,273.3.
A gain in technology stocks lifted the Nasdaq Composite to an intra-day record high, last trading up 0.2 percent at 5,534.177.
U.S. government bond prices rose, with the 10-year note up 9/32 in price to yield 2.382 percent, compared with 2.418 percent late on Friday.
In line with U.S. Treasuries, German 10-year yields , the benchmark for euro zone borrowing costs, fell and last stood at 0.27 percent.
Analysts said a soft dollar weighed on U.S. Treasuries yields. The dollar slid against the safe-haven yen as risk appetite declined, while sterling sank to more than two-month lows after May's remarks.
Sterling was last down 0.9 percent at $1.2166.
"Anything that suggests a hard Brexit is more likely... is very damaging to UK growth prospects," said Richard Franulovich, senior currency strategist at Westpac Banking Corp in New York.
The dollar index, which tracks the greenback versus a basket of six currencies, fell 0.3 percent, to 101.93. The greenback also fell 0.7 percent against the yen to 116.10 .
The euro was last up 0.4 percent, at $1.0569, while Europe's broad FTSEurofirst 300 index dropped 0.50 percent to 1,437.72.
In Asia, MSCI's broadest index of Asia-Pacific shares outside Japan rose 1.1 points or 0.25 percent, to 438.77. Australia's S&P/ASX200 rose 0.9 percent while Hong Kong shares rose 0.2 percent.
Trading was light because Japan was shut for a holiday.
The MSCI world equity index, which tracks shares in 45 nations, fell 0.13 percent to 429.11.
A focus for the week will be a news conference on Wednesday at which U.S. President-elect Donald Trump may give more details about the policies he will seek to implement after he takes office on Jan. 20.
Expectations of more economic stimulus from a Trump administration have helped to boost U.S. stocks and bond yields.
(Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Catherine Ngai, Sam Forgione, and Richard Leong in New York, Yashaswini Swamynathan in Bengaluru; Editing by Bernadette Baum and Dan Grebler)