Crude Oil Plummets 3% On Supply Glut Concerns, Strong Dollar

(RTTNews) - U.S. crude oil plummeted to end over three percent lower on Tuesday, ahead of the official U.S. inventories data with the dollar trending higher against some major currencies, even as concerns over a supply glut persisted.

Meanwhile, reports indicate the OPEC to have pumped 30.56 million barrels a day in November, exceeding its official target for a sixth straight month.

Investors keenly await the weekly crude inventories data with the American Petroleum Institute expected to release its report later in the day and the U.S. Energy Information Administration on Wednesday.

Light Sweet Crude Oil futures for January delivery, the most actively traded contract, plunged $2.12 or 3.1 percent to close at $66.88 a barrel on the New York Mercantile Exchange Tuesday.

Crude prices for January delivery scaled a high of $69.32 a barrel intraday and a low of $66.67.

On Monday, crude oil futures ended up $2.85 or 4.3 percent at $69.00 a barrel, bouncing back from a 5-1/2 year low of $63.72, the lowest level since July 2009. Crude had tumbled to dismal levels after the OPEC decided to maintain the cartel's output at 30 million barrels a day, raising fears of a huge supply glut.

Worries about demand growth on the back of some weak reports on Chinese manufacturing activity in November weighed on oil early on in the session. However, bargain hunting, a slightly weaker dollar and speculation about a cut in U.S. shale oil production lifted crude to a positive close yesterday.

The dollar index, which tracks the U.S. unit against six major currencies, traded at 88.63 on Tuesday, up from its previous close of 87.98 late Monday in North American trade. The dollar scaled a high of 88.64 intraday and a low of 87.95.

The euro trended lower against the dollar at $1.2381 on Tuesday, as compared to its previous close of $1.2470 late Monday in North American trade. The euro scaled a high of $1.2476 intraday and a low of $1.2384.

On the economic front, construction spending in the U.S. surged 1.1 percent to an annual rate of $971.0 billion in October from the revised September estimate of $960.3 billion. Economists expected spending to increase by about 0.5 percent.

Eurozone producer prices dropped at its fastest pace in 18 months during October, pulled down by a slump in energy prices.

Eurozone producer prices fell 0.4 percent month-over-month in October, reversing a 0.2 percent rise in September, preliminary figures from Eurostat showed Tuesday. Economists had forecast a 0.3 percent decline for the month. The news adds to the deflationary woes in the euro area while strengthening the case for more action from the European Central Bank.

Elsewhere in Europe, robust performance of the British construction sector continued in November, even as the pace of growth eased to its lowest in 13 months, suggesting the trend would likely continue in the months ahead supporting economic recovery.

The seasonally adjusted construction purchasing managers' index dropped to 59.4 in November from 61.4 in the previous month, a survey by Markit Economics and the Chartered Institute of Purchasing and Logistics showed Tuesday. Economists anticipated the index to ease to 61.0.