Oil edges lower on dollar, but posts monthly gain

NEW YORK Mon Oct 31, 2011 5:12pm EDT

Unleaded gas price is displayed at JJ's Express Gas Plus station in Phoenix gas station in Phoenix, Arizona August 10, 2011. REUTERS/Joshua Lott

Unleaded gas price is displayed at JJ's Express Gas Plus station in Phoenix gas station in Phoenix, Arizona August 10, 2011.

Credit: Reuters/Joshua Lott

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NEW YORK (Reuters) - Oil prices slipped in low-volume trading on Monday, but posted big monthly gains, as the dollar rose against the yen after Japan intervened in the market to stem the rise of its currency.

Brokers and analysts attributed much of the volume slump and choppy market to MF Global Holdings Ltd MF.N, the futures broker run by former Goldman Sachs chief Jon Corzine, filing for Chapter 11 bankruptcy.

"It's not going to be as easy moving accounts over to a new firm. There are going to be a lot of people in line and so I would think that it's going to be a very volatile, low volume week," said Carl Larry, of Blue Ocean Brokerage.

The U.S. dollar climbed to a three-month high against the yen after Japan's intervention, its third in 2011 and less than three months after the previous, only days before a Group of 20 leaders' summit in France.

The euro tumbled 2 percent versus the greenback and the dollar index .DXY strengthened against a basket of currencies. A stronger dollar can pressure dollar-denominated oil prices by making it more expensive for consumers using other currencies.

Both Brent and U.S. crude settled well above lows as the low trading volume, expiration of U.S. November refined products contracts and end-of-month trading set in, brokers and analysts said. Expectations that the dollar's strength may not last also helped crude prices recover.

"The effect of (Japan's) intervention only lasts so long," said Phil Flynn, analyst at PFGBest Research in Chicago.

ICE Brent December crude fell 35 cents to settle at $109.56 a barrel, still below the 50-day moving average at $109.67, after falling to $108.20.

Brent posted a 6.6 percent gain for October, biggest since April, and after slumping 10.5 percent in September.

U.S. December crude fell 13 cents to settle at $93.19 a barrel, above a $91.36 low, but surged 17.7 percent in October, biggest percentage gain since May 2009.

Brent's premium to its U.S. counterpart seesawed, but remained above $16 a barrel.

U.S. crude trading volume was 52 percent below its 30-day average and Brent 36 percent below its 30-day average, with neither contract reaching 400,000 lots traded.

Expiring front-month November U.S. gasoline and heating oil futures also ended lower.

U.S. stocks slumped as enthusiasm over the agreement to tackle the euro-zone debt crisis waned. Lack of detail on the euro zone's rescue plan had bank shares lead European shares lower.

The 19-commodity Reuters-Jefferies CRB index .CRB fell 1.0 percent, with copper capping its best month in nearly a year with a 2 percent loss.

Investor's await this week a U.S. Federal Reserve meeting ending Wednesday, a Thursday European Central Bank press conference, and a mid-week G20 meeting.

Friday brings the release of key U.S. October nonfarm payroll employment numbers.

OPEC OCTOBER OUTPUT LOWER

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 October output.

U.S. OIL INVENTORY REPORTS

Ahead of weekly reports on U.S. oil inventories, crude stocks were expected to have risen last week, with refined products stockpiles slipping, according to a preliminary Reuters survey of analysts on Monday.

The industry group American Petroleum Institute's inventory report is due on Tuesday at 2030 GMT, with the U.S. Energy Information Administration's report following on Wednesday.

(Additional reporting by Janet McGurty and Gene Ramos in New York, Ikuko Kurahone in London and Rebekah Kebede in Perth; Editing by Marguerita Choy, Sofina Mirza-Reid and David Gregorio)

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