Light, sweet crude futures plummeted Tuesday after China raised interest rates, sparking concerns that demand for raw materials could decrease and sending the dollar higher against the euro.
Oil for November delivery fell 4.32 percent, or $3.59, settling at $79.49 a barrel—the lowest in eight months. The November contract expires Wednesday.
In an effort to slowdown China's rapid growth, the People's Bank of China Tuesday increased its lending and deposit rates by 25 basis points each for the first time since 2007. China's oil imports reached record highs in September. Investors fear that China's decision could hinder global growth and decrease its demand for oil and other commodities. Amid increasing U.S. stockpiles, traders turn to global demand; China, the second-largest consumer of oil after the U.S., has become an important channel for oil supplies.
The dollar rose 1.8 percent against an index of foreign currencies, indicating wariness that the Chinese move may reduce economic growth. As the greenback gained momentum, demand for oil decreased.
Oil prices fluctuated between $79.39 and $83.21 a barrel Tuesday.
Meanwhile, Henry Hub natural gas futures rose Tuesday as traders sensed a buying opportunity after oil prices plunged. Front-month natural gas settled up at $3.51 per thousand cubic feet, after plunging to a 13-month low of $3.40. In earlier trading, natural gas posted a session high of $3.53.
November reformulated gasoline blendstock, or RBOB, settled at $2.05 a gallon after declining 4.98 percent—the biggest one-day percentage fall in more than a year. The intraday range for gasoline was $2.04 to $2.15 a gallon.
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