Oil fell for a second day today after Saudi Arabia signalled Opec would maintain current production levels at the group's meeting later this week, letting the market focus on dollar movements and prospects of monetary stimulus.
US crude for November slid 45 cents to $81.76 a barrel by 0312 GMT, down almost $3 from last week's five-month high of $84.43, reached on expectations the US Federal reserve will carry out this year a new round of monetary stimulus, also known as quantitative easing stage two, or QE2.
ICE Brent for November fell 35 cents to $83.37.
Saudi Arabian oil minister Ali al-Naimi said he was happy with the oil market as he arrived in Vienna yesterday for the first meeting of the Organization of the Petroleum Exporting Countries (Opec) in seven months, to kick off Thursday.
The US Federal Reserve's November meeting is now the focal point, and minutes from its meeting on September 21st, when the central bank said it stood ready to provide more support for the economy and expressed concern about low inflation, are due at 1800 GMT.
"A stronger dollar will weaken oil prices, especially when equity markets are rather quiet," said Serene Lim, a Singapore-based oil analyst at ANZ.
"What has caused the dollar to rebound is that the market has already priced in QE2. Opec members are very likely to maintain production quotas, and they have mentioned a price of $70 to $80 is comfortable."
Saudi Arabia's Naimi also said prices of between $70 and $80 were "ideal," indicating the producer group's most powerful member has no plans to pursue higher prices. That range allows producers to invest in capacity expansion and does not threat the global economic recovery, Opec has said.
The Opec basket price, an average of the group's most representative crude grades, has so far been $75.38 this year, up from a mean of $61.06 for all of 2009.
The dollar rose in early trade today by more than 0.2 per cent against a basket of currencies, after scrambling off recent steep lows against the euro and the yen, as the market tried to gauge the extent of quantitative easing it expects from the Federal Reserve.
Asian equities posted modest gains today , taking their cue from higher world stocks on Monday as investors bet on further asset buying by the US Federal Reserve and a continuation of global currency flows toward emerging markets.
Reuters