- 08Nov
(Reuters) - Oil prices touched two-year highs of $87.49 a barrel on Monday before easing toward $86 a barrel as a stronger dollar led some investors to reduce their positions.
By 1406 GMT, U.S. crude for December delivery shed 40 cents to $86.45 a barrel. ICE Brent was 41 cents lower at $87.70 a barrel.
The stronger greenback, which typically trades in negative correlation with dollar-denominated commodities, also weighed on gold prices, pulling them lower from a fresh record of $1,398.35 an ounce earlier.
"After the strong surge in risk appetite last week, it seems like reality and profit-taking are kicking in today. Global equities are in the red, and oil is slightly lower but still close to a two-year high," Danske Market analysts wrote in a note to clients.
The dollar index, a measure of the greenback's performance against a basket of currencies, rose 0.52 percent to 76.94.
Wall Street futures pointed to a weaker start on Monday .N, while in Europe the euro fell on concerns about the health of some euro zone members and after an expected fall in September German industrial output.
"(Today's lower oil price) is a reasonable reaction given the U.S. dollar continues to strengthen, and it was very unlikely that it could continue to decouple from the U.S. dollar," Commerzbank oil analyst Carsten Fritsch said.
DOLLAR CORRELATION
Both oil prices and the dollar strengthened last Friday after a stronger-than-expected U.S. jobs report.
"(Last week) oil prices were rising on the back of both a weaker and a stronger dollar, telling us that the complex may finally be decoupling from the currency component. However, we have our doubts that this is indeed the case," MF Global analysts said in a note.
Recent oil price increases have also triggered worries about inflation, although a senior International Monetary Fund official said over the weekend that a rise in oil prices would not threaten the global economic recovery.
Looking ahead, investors await the International Energy Agency's monthly oil market report on Friday.
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