03.11.2014 21:11:25
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Crude Oil Plunges To End Below $79 On Supply Glut Fears
(RTTNews) - U.S. crude oil plummeted to end sharply lower Monday, on demand growth concerns with fears of a supply glut after after news reports indicated significantly higher OPEC output in October. This is crude oil's lowest closing since June 2012.
News reports said OPEC output likely rose to a 14-month high in October, with news that Saudi Arabia has cut oil prices for the U.S. Saudi Arabia, which announced a big discount for its customers in Asia and Africa last month, will announce its crude export prices for December this week.
Demand growth concerns and worries over a supply glut continued to pull the commodity down, even as some weak factory activity data from China, the world's second largest energy consumer, weighed on oil prices.
Oil prices also came under pressure after the dollar continued to strengthen against some major currencies on some upbeat manufacturing data from the U.S. and Europe.
Light Sweet Crude Oil futures for December delivery, the most actively traded contract, plunged $1.76 or 2.2 percent to close at $78.78 a barrel on the New York Mercantile Exchange Monday.
Crude prices for December delivery scaled a high of $80.98 a barrel intraday and a low of $78.32.
On Friday, crude oil futures ended lower on some upbeat U.S. economic data and the Bank of Japan's decision to extend its monetary stimulus strengthened the dollar, which in turn led oil lower.
From the U.S., consumer sentiment in the country improved more than previously estimated in October, a Thomson Reuters and the University of Michigan report showed Friday. Meanwhile, Business activity in the Chicago area unexpectedly increased at a notably faster rate in October, to its highest level in a year.
The dollar index, which tracks the U.S. unit against six major currencies, traded at 87.31 on Monday, up from its previous close of 87.09 late Friday in North American trade. The dollar scaled a high of 87.40 intraday and a low of 87.02.
The euro trended lower against the dollar at $1.2483 on Monday, as compared to its previous close of $1.2507 late Friday in North American trade. The euro scaled a high of $1.2513 intraday and a low of $1.2442.
In economic news from the U.S., a report from the U.S. Commerce Department showed construction spending to have declined 0.4 percent to a seasonally adjusted annual rate of $950.9 billion in September from the revised August estimate of $955.2 billion. Economists expected construction spending to increase by about 0.6 percent.
Data from the Institute of Supply Management showed an unexpected acceleration in the pace of growth in U.S. manufacturing activity, with the index climbing to 59.0 in October, up from 56.6 in September. Economists had expected the index to dip to 56.0.
Eurozone's manufacturing Purchasing Managers' Index rose to 50.6 in October, from a 14-month low of 50.3 in the previous month, data from Markit Economics showed. The flash score was 50.7.
In Asia, China's manufacturing sector continued to expand as expected in October, with HSBC manufacturing purchasing managers' index came in at 50.4. Manufacturing activity in U.K, Germany
Meanwhile, China's non-manufacturing business activity expanded at a slower rate in October, data from the National Bureau of Statistics showed Monday. The non-manufacturing business activity index decreased to 53.8 in October from 54 in September. This indicated a slower rate of growth.
From Europe, the British manufacturing sector growth accelerated at its fastest pace in three months in October on domestic demand, with the seasonally adjusted manufacturing Purchasing Managers' Index rising to a three month high of 53.2 in October from a seventeen-month low of 51.5 in September. Economists expected the score at 51.5 from September's originally estimated score of 51.6.
Germany's manufacturing sector returned to growth in October, with the Markit/BME Purchasing Managers' Index rising to 51.4 in October from a 15-month low of 49.9 in September. Nonetheless, the score was slightly below the flash estimate of 51.8.
Another report from Markit Economics showed the French manufacturing sector to have continued to contract in October, although the pace of decline was slower than initially estimated. The headline seasonally adjusted Purchasing Managers' Index fell to 48.5 in October from 48.8 in September. The flash score for October was at 47.3.
Markets are looking ahead to a slew of U.S. economic data this week. The European Central Bank is due to announce its monetary policy on Thursday, November 6.
Monthly non-farm payrolls data, weekly jobless claims report, ADP's private payrolls data for October, the results of Institute for Supply Management's manufacturing and non-manufacturing surveys for October, Markit's final U.S. manufacturing and non-manufacturing purchasing managers' indexes for October and a host of Fed speeches are scheduled for the week. The trade balance report and factory orders data are also due this week.