Oil prices down $1 as U.S. dollar surges

Investing.com - Crude oil futures tumbled on Tuesday, as the U.S. dollar rallied to a one-month peak amid expectations for higher U.S. interest rates later this year.

On the New York Mercantile Exchange, crude oil for July delivery lost $1.28, or 2.14%, to trade at $58.44 a barrel during U.S. morning hours.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.95% at 97.38, the strongest level since April 27.

Dollar-denominated oil futures contracts tend to fall when the dollar rises, as this makes oil more expensive for buyers in other currencies.

The greenback surged after a flurry of U.S. economic reports supported the view that the Federal Reserve could start raising interest rates later in the year.

The Commerce Department reported that orders for long lasting manufactured goods fell 0.5% in April, but the previous month’s figure was revised up to a gain of 5.1% from 4.7%.

Core durable goods orders, which exclude transportations items, rose 0.5%, ahead of expectations for a rise of 0.4%, after a 0.6% increase in March.

Orders for non-defense capital goods excluding aircraft, a key measure of business investment jumped 1.0% from a month earlier, easily outstripping forecasts for an increase of 0.3%.

Another report showed that U.S. consumer confidence improved more than expected this month, boosted by a more positive assessment of the labor market.

The Conference Board said its index of consumer confidence rose to 95.4 from 94.3 in April, compared to forecast for a reading of 94.9.

A separate report indicated that the recovery in the housing market is gaining momentum.

Sales of new homes in the U.S rose 6.8% to an annual rate of 517,000 units in April the Commerce Department said. Economists had forecast a more modest increase of 5.0% to an annual rate of 510,000 units.

Sales of new homes in March were revised up to 484,000 units from the previously reported 481,000 units.

The upbeat data raised hopes that the economy was regaining strength after stalling in the first quarter, supporting the case for higher interest rates.

Federal Reserve Chair Janet Yellen reiterated Friday that the central bank still expects to start raising interest rates later this year if the economy continues to improve as expected.

She also attributed a slowdown in first quarter growth to "transitory factors", including a harsh winter.

Elsewhere, on the ICE Futures Exchange in London, Brent oil for July delivery tumbled $1.30, or 1.99% to trade at $64.22 a barrel.

Meanwhile, the euro fell below the 1.09-level against the dollar as the prospect of a Greek default continued to weigh on sentiment.

Athens has warned that the country would be unable to make a €305 million payment to the International Monetary Fund due on June 5 if a cash-for-reforms deal with its international lenders is not reached by then.