* Worry China to hike rates to brake economy pressures oil
* Dollar surges on Irish bailout fears, also weighs on oil
* Coming up: EIA oil data at 10:30 a.m. EST Wednesday
(Recasts, updates with settlement prices, market activity)
By Robert Gibbons
NEW YORK, Nov 16 (Reuters) - Oil slumped 3 percent on
Tuesday to a two-week low as the dollar rose on euro zone debt
concerns and as fears that China's attempts to cool inflation
will reduce demand and sparked a broad commodities sell off.
The dollar index rose to a seven-week peak and the
greenback reached a seven-week high against the euro as
investors cut exposure to commodities and risk amid concerns
about Ireland and other euro zone economies. []
U.S. crude for December delivery <CLc1> fell $2.52, or 2.97
percent, to settle at $82.34 a barrel.
Oil's three-session slump has pulled prices down 6.23
percent, the biggest three-day percentage slide since the
three-day period to Aug. 12, when rising U.S. jobless claims,
concerns about a faltering economic recovery and a rising
dollar weighed on oil.
In London, ICE front-month January Brent crude <LCOc1> fell
$2.03 to settle at $84.73 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."
An equities slide in China resulted from investors dumping
large-cap bank and energy shares amid rumors of more aggressive
action to control inflation. []
U.S. stocks fell broadly as investors dumped resources and
technology shares amid the worries about China and Ireland.
[]
The Reuters-Jefferies CRB index <.CRB>, 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. []
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Graphic of the performance this year of commodities in
CRB index: http://link.reuters.com/kew48n
Graphic of crude-euro correlation:
http://link.reuters.com/myf75q
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
A stronger dollar can pressure oil and other
dollar-denominated commodities by attracting investors to
foreign exchange markets seeking higher yields, increasing the
value of greenbacks paid to producers and making commodities
more expensive for users of other currencies.
"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 $90 was the target, but
that's not how it looks right now."
Oil has retreated after hitting a 25-month peak above $88 a
barrel last Thursday, the highest prices since the midst of the
financial crisis.
As oil jumped last week, money managers increased their net
long positions to a record 189,002, as of Nov. 9, Commodities
Futures Trading Commission 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 U.S. bond yields.
Oil inventory expectations offered no relief to the price
slump on Tuesday. A Reuters analyst survey yielded a forecast
for U.S. crude stockpiles to be up, though only by 100,000
barrels, though distillate and gasoline stocks were expected to
have fallen last week. []
Industry group the American Petroleum Institute will issue
its latest inventory report at 4:30 p.m. EST (2130 GMT) on
Tuesday, followed by government data from the U.S. Energy
Information Administration on Wednesday morning.
Another sign demand remains tepid was data from Master Card
showing that while U.S. gasoline demand rose last week versus
the previous week, it was down from year-ago. []
(Additional reporting by Gene Ramos in New York and
Christopher Johnson in London; Editing by Lisa Shumaker)
