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Oil falls below $66

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Oil falls below $66

Traders weigh signs of improving global economy against evidence of weak demand

Oil prices CL-FT fell below $66 (U.S.) a barrel Monday as stock markets sank and investors eyed a slew of economic data this week that will help shed light on the health of the U.S. economy.

By midday in Europe, benchmark crude for November delivery was down 31 cents to $65.71 a barrel in electronic trading on the New York Mercantile Exchange. On Friday, the contract added 13 cents to settle at $66.02.

Asian and European stocks were mostly lower, with Japan’s market hit by the yen’s rise to a nine-month high against the dollar. Wall Street was likewise expected to open lower. U.S. stocks fell Friday on disappointing U.S. economic data. Reports on manufacturing and home sales stoked concerns over recovery prospects in the world’s largest economy.

Crude is flirting with the bottom of a $65 to $75 trading range that has held for months as traders weigh signs of an improving global economy against evidence that consumer demand remains weak.

The most closely watched economic indicator will be the Labour Department’s monthly jobs report on Friday. Investors will also get reports on home prices, manufacturing, consumer confidence, construction spending and factory orders.

Analysts also mentioned the news on Iran and its secret underground uranium enrichment facility as a potential risk factor for energy prices.

“The possibility of an Israeli attack on Iran’s nuclear facilities, with the threatened closure of the Straits of Hormuz and consequent loss of 20 per cent of the world’s daily oil flow, would be the greatest threat to economic growth, potentially, in 2010,” said a report from U.S. energy consultancy Cameron Hanover.

In other Nymex trading, gasoline XRB-FT for October delivery fell 1.70 cents to $1.6035 a gallon, and heating oil HO-FT was down 0.48 cent at $1.6723 a gallon. Natural gas NG-FT lost 2.4 cents to $3.961 per 1,000 cubic feet.

In London, Brent crude fell 29 cents to $64.82 on the ICE Futures exchange.

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