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Oil falls below $79, firmer dollar weighs

LONDON - Oil eased under $79 a barrel on Tuesday, extending losses after a nearly 3 percent slump in the previous session as part of a wider commodities slide tied to a rebound in the US dollar.

US crude futures lost 35 cents to $78.67 a barrel by 0905 GMT, off a three-week low of $78.35 hit on Monday. London Brent crude was 39 cents down at $76.19.

‘The strengthening of the dollar has had a slight impact on the price of oil,’ said Gerard Burg, Minerals and Energy Economist at National Australia Bank.

Commodities including oil, gold and copper have all retreated in the face of a resurgent dollar.

Investors had bought crude—which hit a record-high of $83.90 on Sept. 20 -- and other commodities in recent weeks as a hedge against the weaker US dollar, which reached multi-year lows against other major currencies following a cut in US interest rates last month.

But the dollar has recovered this week as hopes of a further cut in rates this month dimmed after a report late last week showed US jobs growth in September was the strongest since May, although investors expect a cut by the year’s end.

The US dollar firmed against the euro on Tuesday, but slipped against the yen.

Analysts also cite the passing peak of the Atlantic hurricane season, which officially runs through November but is yet to cause any major damage to oil or gas infrastructure, as another bearish factor weighing on oil.

The slide in oil comes as concerns had begun to be expressed about high prices.

The new executive director of the International Energy Agency, Nabuo Tanaka told Reuters on Monday that high prices would eventually hurt consuming nations’ economies, but stopped short of calling on OPEC to further increase output.

OPEC members last month agreed to increase oil production by 500,000 barrels per day starting Nov. 1.

Attention later this week will turn to US data, expected to show a 600,000-barrel build in crude stocks, a 600,000-barrel draw in distillates and a 100,000-barrel fall in gasoline inventories, a preliminary Reuters poll showed.

The weekly data will be released a day later than usual on Thursday due to the Columbus Day holiday.