Oil fell towards $68 a barrel today, weighed down by a weaker dollar and by heightened uncertainty in the market following a decision by a US exchange to enforce limits on large positions.
US crude for October delivery fell 86 cents to $68.43 a barrel by 0925 GMT, after having touched a low of $68.02. London Brent crude fell 60 cents to $67.09 a barrel.
The Chicago Mercantile Exchange on Friday pledged to enforce existing position limits on NYMEX, CME, and other exchanges as of September 14th.
Traders who are over the position limits will face fines or can be found guilty of price manipulation unless they get a hedge exemption, according to an advisory notice by the CME.
"There's a little bit of concerns or question marks about the CME notice on position limits... with effective date of today," said Olivier Jakob of Petromatrix in Switzerland.
"That might have made the market a little bit nervous and I would expect that the market is going to remain a little bit cautious until we can see through this notice," he said.
Some oil traders told Reuters they interpreted the advisory as a CME warning it could soon toughen up its enforcement of position limits on commodities exchanges and potentially offer fewer exemptions for exceeding those limits in the future.
Adding to pressure on crude prices, the dollar inched up from a year-low of 76.457 against a basket of six other major currencies.
Oil fell over 3.5 per cent on Friday, after having risen more than 5 percent in the first four sessions of last week.
The secretary-general of the Organization of the Petroleum Exporting Countries said last week a weak dollar, the currency of the oil market, was a concern and that the group needed higher average oil prices to step up investment.
Meanwhile, European equities opened lower, mirroring oil's price decline. Since March 9th, equities and oil have traded in close correlation.
On the supply front, Kuwait's oil minister Sheikh Ahmad al-Abdullah was reported as saying by state news agency KUNA yesterday that core Gulf Arab OPEC members Saudi Arabia and Kuwait were delivering 98 percent of the crude output cuts they had pledged under Opec deals.
Opec compliance has slipped from a record of more than 80 per cent earlier this year to what the Kuwaiti oil minister said was about 68 per cent as crude prices rebounded to a high of $75 in August.
Reuters