Summary Oil dropped below $90 a barrel for the first time this year on Monday.
NEW YORK (AP) – Benchmark oil for April delivery fell 56 cents to finish at $90.12 a barrel in trading on the New York Mercantile Exchange. Earlier, the price fell as low as $89.33 a barrel.
The price of oil declined as markets continued to digest the introduction in the U.S. of automatic government spending cuts, which could hurt the world s leading economy.
Spending cuts of roughly $85 billion automatically kicked in on Friday after President Barack Obama and Congress failed to meet a deadline for striking a deal to avert or soften the reductions. Negotiations on Sunday ended in a bitter impasse, and what happens next is anyone s guess.
The International Monetary Fund has predicted that the spending cuts could reduce U.S. growth by some 0.5 percentage point in 2013.
Traders also said that a report showing weakness in China s service sector contributed to the drop in oil.
While a month ago oil was close to exceeding $100 a barrel, analysts said prices could continue to slide.
A report from JBC Energy in Vienna noted that refineries are undergoing a higher than normal rate of maintenance. That reduces demand for oil, hurting the price. And Jim Ritterbusch of Ritterbusch and Associates in Illinois says recent strength in the dollar is a major reason that oil is down 7 percent a little more than 2 weeks.
The increase in the dollar makes crude more expensive and a less attractive investment for traders using other currencies. While the euro was worth over $1.36 on Feb. 4, on Monday it was trading just under $1.30.
Brent crude, used to price many kinds of oil imported by U.S. refineries, fell 31 cents to $110.09 a barrel on the ICE Futures exchange in London.
