By Fayen Wong
Doubts over the prospects of early global economic recovery, firmer dollar leads to crude price fall.
Oil fell to a five-week low near $64 a barrel on Monday, pressured by doubts over the prospects of an early global economic recovery and a firmer dollar.
The US jobless rate reached a 26-year high and Euro zone unemployment is at the highest in a decade, reports showed last week. The dollar rose on Monday, limiting the appeal of oil as an alternative investment.
"Two major pieces of data will be remembered from the past week, the UK economy shrank by 2.4 percent, the biggest contraction since 1958, and the unemployment figure from the US," said Stefano Vincelli, an equities and derivatives trader at Halifax Investments in Sydney.
"Overall, the supply and demand picture for crude is still a bearish number."
US crude fell $2.47 from Thursday's close to $64.26 a barrel by 11.48am UAE time. It traded as low as $64.03, the lowest intraday price since May 28. Brent crude fell $1.51 from Friday's close to $64.10.
NYMEX floor trading was closed on Friday because of the U.S. Independence Day holiday, and although oil traded electronically the exchange did not issue an official closing price.
Adding to pressure on oil, European stocks got off to a weaker start on Monday following on from losses in Asia.
Investors will focus later this week on a meeting of the G8 industrial nations. The summit was expected to highlight signs that economies were stabilising, but emphasise that it was too early yet to withdraw policy stimulus.
Societe Generale said the correction in oil prices, which surged 42 percent in the last quarter, was long anticipated and predicted that oil prices would continue falling and average around $60 a barrel in July.
"Non-fundamental price support, based on economic optimism, risk appetite, and increasing medium to long-term inflation expectations, has faded for now," Michael Wittner of SG said in a research note.
Attacks on oil installations in Nigeria, traditionally Africa's top oil producer, could limit losses.
Chevron, Shell and Italian energy firm Agip have cut oil output by around 273,000 barrels per day in the last six weeks following the latest campaign of militant violence. (Reuters)