By Myra P. Saefong and Virginia Harrison, MarketWatch
SAN FRANCISCO (MarketWatch) — Crude oil futures fell Monday, as a fresh warning from Moody’s Investors Service about France’s credit rating and an expected announcement from the U.S. supercommittee that it has failed to reach a deficit-reduction agreement dulled prospects for future oil demand.
Crude for January delivery CL2F -1.67% , the new front-of-month contract, traded down $1.30, or 1.3%, at $97.37 a barrel on the New York Mercantile Exchange.
Almost every European-Union related story “suggests [an] either severe austerity or dissolution, neither of which will be good for energy demand,” said Michael Fitzpatrick, editor in chief of the Kilduff Report.
Moody’s Investors Service repeated in a weekly credit update Monday that rising debt costs and uncertain economic outlook pose a danger to France’s AAA rating.
The U.S. congressional committee assigned to draft a plan for cutting $1.2 trillion from the nation’s deficit over 10 years is expected to announce that it has failed to come up with a plan, according to media reports. Read more about the supercommittee developments.
“Neither development should be a surprise,” Fitzpatrick said in a note. “France and the rest of the euro zone are getting squeezed by higher interest rates.”
After the supercommittee failure is official, “look for markets to stabilize and head higher into the short holiday week,” he said.
Oil closed out Friday’s North American session with a 1.6% weekly loss, snapping a six-week winning streak, as worries about Europe’s debt problems and some weak economic data stoked worries about future demand.
A stronger dollar Monday also contributed to oil’s losses. A stronger dollar pressures crude prices as it makes the commodity more expensive to holders of other currencies.
The dollar index DXY +0.47% , which tracks the performance of the greenback against a basket of six other major currencies, rose to 78.487, from 78.098 in late North American trade Friday.
Prices for heating oil and gasoline declined along with oil. December heating oil HO1Z -0.35% traded at $3.03 a gallon, down 0.4 cent and December gasoline fell 0.3 cent to $2.48 a gallon.
Myra Saefong is a MarketWatch reporter based in San Francisco.
Virginia Harrison is a MarketWatch reporter based in Sydney.
