Oil hits two-year low; dollar rises ahead of Fed

Mon Sep 15, 2014 4:30pm EDT
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By Herbert Lash

NEW YORK (Reuters) - Brent crude fell below $97 per barrel on Monday, its lowest level in more than two years, as weak Chinese economic data cut the prospect for demand at a time of abundant supply, while expectations that the Federal Reserve will provide new details this week about its plans to raise interest rates lifted the dollar.

Chinese factory output grew at the weakest pace in nearly six years in August as growth in other key sectors also cooled, raising fears the world's second-largest economy, and the biggest energy consumer, may be at risk of a sharp slowdown.

The Brent LCOc1 contract for October delivery, which expired on Monday, fell as low as $96.21 a barrel, the weakest price since July 2012. The contract later pared losses to settle down 46 cents at $96.65 a barrel. The November contract for Brent LCOX4 fell 8 cents a barrel to settle at $97.88.

News that Russian Energy Minister Alexander Novak will meet OPEC officials on Tuesday in Vienna was cited as helping pull oil prices off lows.

"Maybe the pullback on the China data was a little overdone," said Gene McGillian, an analyst at Tradition Energy in Stamford, Connecticut, echoing the sentiment of other analysts.

U.S. crude CLc1 rose 65 cents to settle at $92.92 a barrel.

The dollar rose on expectations that the Fed's policy-setting Federal Open Market Committee will affirm the U.S. economy's steady recovery at the end of its two-day meeting on Wednesday and possibly provide a timeline as to when it would start to raise rates.

U.S. manufacturing output fell for the first time in seven months in August, but the underlying trend remained consistent with steadily rising factory activity. That was confirmed by other data showing factory activity in New York state jumped to its highest level in nearly five years in September.   Continued...

Morning commuters pass by the New York Stock Exchange September 15, 2014. REUTERS/Brendan McDermid