NEW YORK (Reuters) - Oil prices fell by 1.9 percent on Friday, taking their biggest one-day dip in three weeks, as the U.S. dollar firmed against foreign currencies, slashing investment flows into oil and other commodities.
U.S. light crude for delivery in April fell $1.52 to $80.68 a barrel, dropping for a second day, as the dollar gained against the euro on worries over Greece’s debt, and after a Reuters poll forecast over-supply in the oil market this year. The U.S. April crude contract expires on Monday.
Oil prices have fallen in two consecutive weeks. Prices fell by up to 2.8 percent to below $80 a barrel earlier Friday, before paring losses later in the day. London Brent crude for May fell $1.60 a barrel to $79.88.
Concerns over Greece’s mounting debt helped push the euro to a more than two-week low against the dollar. <USD/>
Markets are awaiting a summit next week to see whether Greece will get financial aid from euro zone members to emerge from fiscal crisis. <FRX/>
The U.S. currency firmed against major foreign currencies by more than 0.6 percent, and the dollar index .DXY rose to its highest since March 5.
“The bears are moving back into the market and looking at the dollar as a signal to sell (oil),” wrote Stephen Schork, editor of the Schork report on energy markets.
A stronger dollar makes oil, priced in dollars, more expensive for foreign currency holders. It also denotes investors moving away from assets deemed riskier, like commodities and equities, and into safe-haven bets like U.S. Treasury notes. The S&P 500 stock index fell by 0.6 percent. .SPX
Commodities also fell after India’s Central Bank raised interest rates in a bid to stem inflation in one of the world’s top energy consumers. The move in India comes after China has also tightened monetary policy by boosting bank reserve requirements this year.
“There was a strong reaction to the India central bank news. Any tightening moves by the incremental consuming countries are going to have an out-sized impact,” said John Kilduff, partner at hedge fund Round Earth Capital in New York.
According to a Reuters poll of 10 top oil-tracking analysts and organizations published, the global oil market will likely face oversupply of 150,000 barrels per day (bpd) this year, causing stocks to rise, as OPEC pumps more crude than the market needs.
The Organization of the Petroleum Exporting Countries decided this week to keep its oil production targets at current levels, maintaining production cuts in place since 2008. But the producer group is pumping well above its declared targets, helping keep a lid on prices.
UK consultancy Oil Movements said on Thursday it expected seaborne oil exports from OPEC, excluding Angola and Ecuador, would rise by 70,000 bpd in the four weeks to April 3.
Oil prices earlier in March rose above $83 a barrel, near the top of their 18-month range, as investors bet a broad economic recovery would boost global demand for crude.
Additional reporting by Christopher Johnson in London, Robert Gibbons and Gene Ramos in New York; Editing by David Gregorio