MW: Oil prices drop for a third session on worries about demand
India's central bank unexpectedly raised interest rates Friday to contain inflation
By Polya Lesova, MarketWatch
FRANKFURT (MarketWatch) -- Oil futures declined for a third session on Monday, as traders worried that potential increases in global interest rates will weigh on the economic recovery and energy demand.
Crude oil for April delivery fell 93 cents, or 1.2%, to $79.75 a barrel in electronic trading on Globex. The contract expires at the close of trading on Monday.
Crude for May delivery, the most actively traded contract, dropped 94 cents to $80.03 a barrel.
Oil prices dropped 1.8% on Friday, pressured by the U.S. dollar's strength and the decision of India's central bank to raise interest rates.
The Reserve Bank of India raised its key lending and borrowing rates by a quarter-percentage point on Friday to contain inflation and anchor expectations of rising prices.
The RBI raised the repurchase rate, or key lending rate, to 5% and the reverse repurchase rate, or the borrowing rate, to 3.5%.
"The move comes on the heels of China tightening monetary and lending policies as well, while here in the U.S. there are rumors of yet another imminent rise in the discount rate," said Edward Meir, senior commodity analyst at MF Global.
Also, traders are considering the implications of last week's meeting of the OPEC cartel, which decided to keep its production quotas unchanged.
"The cartel is presiding over a supply/demand balance that is essentially in surplus, just as we head into one of the seasonally weaker quarters of the year demand-wise," Meir said in a note to clients.
U.S. stock futures pointed to a lower opening on Wall Street on Monday, as European equity markets posted losses. No major U.S. economic data are scheduled for release on Monday.
The U.S. dollar index (DXY 80.78, +0.02, +0.02%) , which tracks the performance of the greenback against a basket of other major currencies, edged higher to 80.83 in recent trading from 80.747 on Friday.
