Oil slumped 3% on Tuesday, falling for a third straight session due to the stronger dollar, mounting concerns about the prospect of tighter monetary policy in China and eurozone debt and economic woes. Oil's slump also came ahead of weekly oil inventory reports expected to show US crude stockpiles rose last week. The dollar index rose to its highest level since late September and the greenback reached a six-week high against the euro as investors cut exposure to commodities and risk amid concerns about Ireland and other eurozone economies. China's key stock index fell by 4% as investors dumped large cap bank and energy shares amid rumors of more aggressive action to control inflation. US crude for December delivery fell USD 2.43, or 2.86%, to USD 82.43 a barrel at 12:32 pm EST (1732 GMT). In London, ICE front-month January Brent crude fell USD 1.94 to USD 84.82 a barrel. "The prospect of further monetary tightening in China is worrying for all commodities," said Carsten Fritsch, analyst at Commerzbank in Frankfurt. "So far, Chinese oil demand has been robust, but there are concerns that it could be seriously affected by higher rates, for example." US stocks declined, with the Nasdaq falling about 2% as investors dumped resources and technology shares amid the concerns about China and Ireland. Gold fell a third successive day to its lowest in two weeks as the stronger dollar kept commodities under pressure and offset the usual lift bullion would receive from concern over the Irish debt crisis. A stronger dollar can pressure oil prices by attracting investors to foreign exchange markets seeking higher yields, increasing the value of greenbacks paid to oil producers and making oil more expensive for users of other currencies. The Reuters-Jefferies CRB index, a global commodities benchmark, hit three-week lows on Tuesday as commodity prices plunged in a second major sell-off in three days as the dollar surged. "There was just too much speculative length in crude and this is being bled out of the market right now. There's worry about euro zone debt and whether China will raise its interest rate," said Andy Lebow, broker at MF Global in New York. "A week ago, every trader thought USD 90 was the target, but that's not how it looks right now." Oil has retreated after hitting a 25-month peak above USD 88 a barrel last Thursday, the highest prices since the midst of thefinancial crisis. As crude oil jumped last week, money managers increased their net long positions to a record 189,002, as of November 9, CFTC data showed. The dollar has rebounded strongly over the last two weeks as the impact of the Federal Reserve's quantitative easing has pushed up US bond yields. Expectations about oil inventories provided no relief to the price slip on Tuesday. Ahead of weekly oil inventory reports, analysts surveyed by Reuters expected data to show US crude stockpiles rose last week by 400,000 barrels, though distillate and gasoline stocks were expected to have fallen, a Reuters poll showed. Industry group the American Petroleum Institute will issue its latest inventory report at 4:30 pm EST (2130 GMT) on Tuesday, followed by government data from the US Energy Information Administration on Wednesday morning.

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