As stock markets fell and US dollar strengthened, crude for January delivery dipped to US$81.3 in electronic trading on the Nymex, while Brent crude fell to US$83.4 a barrel on the ICE Futures exchange in London.
Fears that Ireland's debt crisis will spread to other financially weak European countries have impacted stock markets, as a stronger dollar makes crude more expensive for traders with other currencies.
Underlying fundamentals of the oil market are much stronger currently as compared to earlier in the year, and will continue to push prices higher in coming weeks. Oil demand is expected to spike to all time highs in China to record highs by the end of the year despite recent measures to contain inflation. Some analysts are less optimistic about a pick-up in oil demand in USA and Europe.
On the first day of the week prices had earlier risen with rising euro vs the dollar following the agreement by European Union and International Monetary Fund to bail out debt-laden Ireland. However, these sentiments soured on fears that other nations may need rescuing. The Irish bailout is the second emergency rescue within the eurozone this year. It aims at cleaning up Ireland's devastated banking sector and slashing the country's huge public deficit. It comes six months after a €110 bln EU-IMF rescue package for Greece.