Oil futures retreated on Monday after several reports underscored sputtering economic growth in some of the world's biggest oil consumers, raising fresh concerns about demand.
Light, sweet crude for November delivery settled 96 cents, or 1%, lower, to $91.93 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange settled $1.61, or 1.4%, lower to $109.81 a barrel.
The oil market got its first opportunity Monday to react to comments from a Chinese central-bank adviser, who said the economy of the world's second-biggest oil consumer hasn't shown signs of rebounding in the third quarter. Song Guoquing also told a forum in Beijing on Saturday that domestic investment is unlikely to expand dramatically in the short term.
Meanwhile, Germany's Ifo Institute said business confidence in the country fell for a fifth straight month. Germany is the euro zone's largest economy and is seen as the major engine behind the bail-outs of weaker countries in the currency bloc.
The news was little better in the U.S., where the Federal Reserve Bank of Chicago said its National Activity Index fell in August. The report is seen as a barometer of the broader economy, and underscores the weak state of the U.S. economy, the world's largest oil consumer.
"The economy is weak from a global standpoint," said Tony Rosado, broker at Dorado Energy Services in New York. "This market wants to travel to the sub-$90s," he added, referring to the price of U.S.-benchmarked crude.
Monday's selloff underscores how economic weakness around the world has returned to focus for the oil market. Nymex crude is down more than 7% over the last week, amid concerns that prices had risen too high for consumers to tolerate. Crude has declined despite the Federal Reserve's most recent bond-buying program, which many expected would push oil prices even higher.
"We continue to be driven more by macroeconomic and equity factors" than supply-and-demand forces, such as oil inventory levels, said Kyle Cooper, managing partner at IAF Energy Advisors in Houston.
Mr. Cooper noted that much of the day's losses appeared driven by a stronger dollar, which rallied against the euro and other currencies following the downbeat news out of Germany. Crude often trades opposite the greenback because a stronger dollar makes the dollar-traded commodity more expensive in other currencies.
The ICE Dollar Index, which tracks the dollar against a basket of currencies, recently rose 0.3%, to 79.532.
On the bullish side, the market remains supported by tensions between Iran and the West. Iranian President Mahmoud Ahmadinejad, in New York for the United Nations General Assembly, played down the prospects of an Israeli military strike on his country's nuclear installations. Though he said he would hold the U.S. responsible if such an attack occurred.
"The same rhetoric has been hitting the media airwaves for months and I believe the market is starting to accept that the rhetoric may continue but it may not mean that military action is imminent," wrote Dominick Chirichella, analyst at the Energy Management Institute.
Front-month October reformulated gasoline blendstock, or RBOB, settled 2.49 cents, or 0.9%, lower to $2.9176 a gallon. October heating oil settled 2.20 cents, or 0.7%, lower, at $3.0987 a gallon.
Copyright (c) 2012 Dow Jones & Company, Inc.
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