The U.S. dollar has strengthened in recent weeks, helping to pull oil prices and most other commodities lower. The dollar index, which tracks the performance of U.S. currency against several other major currencies, rose 0.8 percent yesterday to 76.30, a two-month high. Stocks fell sharply Monday after the S&P lowered Italy’s credit rating outlook from stable to negative late Friday. The European Central Bank Governing Council said the Greece situation is worse than those of Ireland and Portugal. There is growing concern of a Greek default. Traders said crude oil declined on Monday from the strengthening dollar and on concern over Europe’s sovereign debt crisis. Crude oil for July delivery fell $3.55 per barrel Monday, to $96.55 at midday. Oil traders on the New York Mercantile Exchange believe weaker economic data and a stronger dollar will continue to pressure the oil market. U.S. demand is expected to decline due to weaker manufacturing numbers. Analysts suggest that if global economic growth ends 2011 one percent below expectations demand for oil will be reduced about 580,000 barrels a day. But for every analyst who projects lower oil prices, there’s a counterpart who sees higher oil prices on the horizon. Goldman Sachs economists believe persistent global oil demand, marginal supply growth and easy money are reasons they think another damaging oil price spike could be ahead. Economists believe high unemployment and weak inflation “will keep the fed funds rate near zero through next year. They believe that should help keep pushing unemployment lower, but at the expense of further dollar depreciation. And, they say, that will lead to more global oil demand and higher prices.

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