Benchmark West Texas Intermediate crude dropped $2.17, or 2.2 percent, to $97.14 per barrel in afternoon trading on the New York Mercantile Exchange.
In London, Brent crude gave up 15 cents at $118.63 per barrel on the ICE Futures exchange.
Investment banks like Goldman Sachs have said oil should rise over the next 18 months. But crude has hovered around $100 per barrel for more than a month following weak gasoline demand, consumer confidence and jobs data in the US Reports that Saudi Arabia would boost oil production to 10 million barrels per day pushed prices lower late last week.
“You have some guys out there that are pretty fearful of a real drop in oil prices now,” analyst Stephen Schork said.
Oil slipped even further in afternoon trading Monday as the dollar strengthened compared with other major currencies. Oil, which is priced in dollars, tends to fall as the dollar strengthens and makes crude more expensive for investors holding foreign currency.
The US Dollar Index, which measures the greenback versus other major currencies, was still down slightly in ?–ternoon trading but off earlier lows. The dollar moved higher after Standard & Poor’s cut Greece’s credit rating, saying that risks associated with the country’s financial bailout are rising, “given the increasingly complicated political environment in Greece coupled with its current difficult economic climate.” Meanwhile, Shell declared force majeure on crude contracts from the Trans-Niger Pipeline in West Africa, after rebels apparently cut into it and caused leaks and fires. Under force majeure Shell seeks to be released from supply obligations for reasons beyond its control. The oil company said the leaks have been repaired, but oil loading schedules are delayed.
Analysts are concerned an escalation of violence and instability in the Middle East and North Africa would send oil prices higher and undermine global economic growth.
In other Nymex trading for July contracts, heating oil fell a penny to $3.0987 per gallon and gasoline futures dropped 2 cents to $2.9927 per gallon. Natural gas lost 12 cents to $4.639 per 1,000 cubic feet.
