Oil tumbles as strong dollar, oversupply weigh on investors

Oil prices fell on Monday, dented by the rise in the U.S. dollar to seven-month highs, and analysts see more losses triggered by the mismatch between global supply and demand.

The fall was part of a wider decline in commodities that has also been stoked by worries over faltering demand from China, with prices for base metals such as copper and nickel tumbling. However, speculators have turned increasingly negative on crude.

U.S. West Texas Intermediate (WTI) crude futures CLc1 fell $1.26 a barrel to $40.64 a barrel by 0418 ET. The contract broke below $40 on Friday for the first time since August. Benchmark January Brent futures LCOc1 were last down 90 cents at $43.76 a barrel.

The U.S. Federal Reserve is widely expected to deliver its first rate rise in almost a decade when it meets next month, while the European Central Bank looks almost certain to continue to ease monetary policy.

A stronger dollar .DXY tends to make it more profitable for non-U.S. investors to sell their dollar-denominated commodity holdings. [FRX/]

Oil prices have halved over the last 12 months after OPEC decided to maintain its production levels, or even increase them, to retain market share, in part by forcing higher-cost producers elsewhere to cut output.

Oil markets were keeping an eye on developing geopolitical tensions in the Middle East as Jordan's King Abdullah will hold talks with Russian President Vladimir Putin on how to tackle "terror groups" led by Islamic State in Syria, an official source said.