Oil falls more than $3 on dollar at 2-month high

CRUDE oil futures slipped more than three dollars, Monday, as the dollar surged to a two-month high versus the euro due to debt worries in Europe.

North Sea Brent crude futures led the oil complex lower. It was trading 3.03 dollars lower at 109.36 dollars a barrel , having gone as low as 109.13 dollars. U.S. crude was trading 2.81 dollars lower at 97.29 dollars.

The dollar rose because a block of bad news about the euro zone crisis damped the single currency. Following Fitch Ratings’ cut of Greece’s debt ratings by three notches on Friday, pushing the country’s debt deeper into junk status, rival Standard & Poor’s cut its outlook for Italy to “negative” from “stable” on Saturday.

“Ratings cut for Italy and concern over Greek restructuring and the subsequent euro weakness appear to have prompted the price fall in crude this morning,” Mark Thomas, head of energy with brokerage Marex Financial, said.

The euro fell below 1.40 dollars briefly, the level which had been seen an important support. Olivier Jakob with Petromatrix said the euro would remain the key focus of global investors. “Crude oil has not been able to find any follow-through buying over the last ten days and without new fundamental developments it is likely to be harder to find strong fresh buying into crude oil if the Euro weakens further,” Jakob said.

European air traffic was on alert as an eruption of Iceland’s most active volcano closed the island’s main airport. Aviation authorities in Iceland said it hoped to reopen Keflavik  airport later on Monday.

Other European nations watched for any impact on their air routes from a towering plume of smoke and ash.
Experts said they saw little chance of a repeat of last year’s six-day closure of airspace, which also hit transatlantic flights, when another Icelandic volcano erupted, although airlines have been warned the new ash cloud will drift.