Oil dropped more than a dollar below $80 a barrel today, sapped by hints of weaker demand for fuel in the world's top energy users and a strengthening US dollar.
US crude for September delivery fell $1.80 to $79.68 a barrel by 1304 GMT, off a session low of $79.55. London Brent crude was down $1.90 at $79.09.
Oil last week hit a high of $82.97, the strongest since May, but traders had predicted prices would soften because of oversupply in the market.
"It's fighting shy of wanting to go higher," said one trader, who could not be named. "If the dollar strengthens, it will weaken. If the dollar weakens, it will rise."
The dollar, which has been in decline since around May, today edged higher against a basket of currencies. But any strength could be short-lived.
Speculation has mounted the US Federal Reserve, which meets later today, could signal a willingness to print more money to try to support growth and also renew its promise to keep rates near zero.
For oil markets, the impact is potentially double-edged.
If it weakens the US currency, that could drive the price of dollar-denominated commodities higher because they become relatively cheap for non-dollar buyers.
But the suggestion the world's largest economy is still flagging has negative implications for oil demand.
Reuters