Oil prices fell below US$86 a barrel Monday as OPEC cut its forecast for global oil demand and investor concerns over Europe's debt crisis prompted another bout of turmoil in financial markets.
By early afternoon in Europe, benchmark oil for October delivery was down $1.58 at US$85.66 in electronic trading on the New York Mercantile Exchange. Crude had fallen $1.81 to finish at US $87.24 on Friday.
In London, Brent crude for October delivery was down $1.87 at US$110.90 on the ICE Futures exchange.
Traders are fretting over a possible Greek debt default even though the country's cash-strapped government said Sunday that it would impose a new property tax in a bid to meet fiscal targets essential to maintaining a vital international bailout program.
The debt crisis has helped strengthen the U.S. dollar against the euro. A stronger dollar makes commodities such as oil more expensive for investors with other currencies.
The euro traded at $1.3495 early Monday, its lowest level since mid-February, later rebounding to $1.3607.
Stock markets, which oil traders look to as a barometer of overall investor sentiment, fell in Asia and Europe on Monday.
Also weighing on prices was OPEC's latest monthly oil market report in which the 12-country group supplying about a third of the world's crude cut its 2011 and 2012 forecasts for global demand.
OPEC slashed its 2011 outlook by 150,000 barrels a day for 2011 and by 40,000 barrels a day for 2012, saying "turbulence in world economic recovery has resulted in considerable uncertainty for demand growth next year."
Overall, it forecast world oil demand for 2011 at 87.99 million barrels a day, down from its August estimate of 88.14 million, while demand for 2012 was forecast at 89.26 million barrels a day.
In other Nymex trading for October contracts, heating oil fell 5.32 cents to US$2.9326 a U.S. gallon (3.79 litres) and gasoline futures dropped 4.5 cents to US$2.7260 a gallon. Natural gas for October delivery slid 2.3 cents to US$3.892 per 1,000 cubic feet.
(TSX:ECA), (TSX:IMO), (TSX:SU), (TSX:HSE), (NYSE:BP), (NYSE:COP), (NYSE:XOM), (NYSE:CVX), (TSX:CNQ), (TSX:TLM), (TSX:COS.UN), (TSX:CVE)