Oil falls below $81 in Europe as investors eye weak US crude demand, Fed meeting

Oil falls below $81 amid weak US crude demand

Oil prices fell below $81 a barrel Monday, pushed down by a stronger dollar and investor concerns that slower U.S. demand for crude doesn’t justify the recent rally.

By early afternoon in Europe, benchmark crude for April delivery was down 56 cents to $80.68 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 87 cents to settle at $81.24 on Friday.

Oil prices jumped from $69 early last month on expectations an improving U.S. economy would bring crude demand up with it. But oil consumption has lagged, and prices have stalled in the low $80s for the last week.

“U.S. demand for oil is falling,” energy consultant Stephen Schork said in a report. “Until we see a decrease in unemployment and an increase in consumer confidence we will remain on guard for a double dip recession.”

Investors will be eyeing this week’s Federal Reserve meeting for signs of when policymakers may start raising record-low interest rates.

“No change is expected from the Fed but we are gradually getting closer to the timeframe when the Fed could start to marginally increase rates and signs of that will be (sought) in the Fed comments,” said Olivier Jakob of Petromatrix in Switzerland.

Also on the schedule is OPEC’s midweek meeting at its Vienna headquarters, but analysts had few expectations of market-moving news from the world’s key oil exporters.

“With prices relatively high despite a woeful compliance record, we don’t expect to see much change to either output or to cartel’s future plans,” said Edward Meir, senior commodity analyst at MF Global in New York.

Iran’s oil minister said Monday that OPEC should stick to its current output targets.

“The idea of Islamic Republic of Iran is not to increase production and OPEC should not take any decision to change production,” Masoud Mirkazemi told reporters in Tehran. “We estimate that we can expect an oil price of $80 per barrel for this year.”

A slightly stronger dollar also pushed down oil prices, as a rising dollar makes oil more expensive for investors holding other currencies.

The euro fell to $1.3724 on Monday from $1.3757 late Friday in New York.

In other Nymex trading in April contracts, heating oil fell 0.44 cent to $2.0896 a gallon, and gasoline dropped 0.29 cent to $2.2521 a gallon. Natural gas declined 4.7 cents to $4.353 per 1,000 cubic feet.

In London, Brent crude was down 48 cents at $78.91 on the ICE futures exchange.

Associated Press writers Alex Kennedy in Singapore and Nasser Karimi in Tehran contributed to this report.