* U.S. oil drops to $98.35; Brent slides to $112.94
* Euro dips to 6-week trough versus dollar
* Brent to trade in $15 range this week -analyst
By Manash Goswami
SINGAPORE, May 16 (Reuters) - U.S. oil futures slipped to as low as $98.35 a barrel on Monday as the dollar index rose to a six-week high on worries that Greece may restructure its sovereign debt.
Brent crude for June
The euro, which also dragged down gold and silver, may test pivotal support areas after IMF chief Dominique Strauss-Kahn was charged with sexual assault, increasing uncertainty on aid for Greece and other indebted euro zone countries.
"The euro is coming down day by day and that is impacting oil prices," said Ken Hasegawa, a commodity derivatives manager at Japan's Newedge brokerage. "After the big rebound, oil prices are loosing direction."
U.S. oil futures may trade between $95 to $104.50 a barrel this week, while Brent may swing in a $15-a-barrel range, Hasegawa said, as the uncertainty on the direction of the euro because of the zone's economic outlook remains.
"We need to see what impact the euro will have on the forex market, and what it will mean for commodity prices," he said.
Oil and dollar-denominated commodities often move inversely to the dollar and a stronger greenback typically pressures oil.
Both Brent and U.S. oil futures are technically neutral, according to Reuters market analyst Wang Tao. Brent is biased to fall towards $105.21 per barrel, a target established last week, while U.S. oil is trapped within a range of $95.40-$100.75 per barrel, he said.
ECONOMIC UNCERTAINTY
Euro zone finance ministers are likely to back a bailout package for Portugal on Monday, with new conditions set by Finland. The meeting was also expected to pressure Greece to announce more austerity steps to secure further emergency funding. [ID:nLDE74E0N7] [ID:nN15215355]
The U.S. economy remains on a solid footing but it is still to early for the Federal Reserve to offer a detailed view of its exit strategy, Atlanta Fed President Dennis Lockhart said on Sunday. Lockhart said the lack of a step-by-step guide for a reversal of unprecedented stimulus measures should not be mistaken for complacency about the need to be ready. [ID:nN15239860]
"We market participants are always waiting for any announcement on interest rates in the U.S. and Europe to give us an idea on the future direction of markets," Hasegawa said. "Overall, interest rates are likely to go up faster in Europe than in the U.S."
President Barack Obama on Sunday warned Congress that failing to raise the U.S. debt limit could lead to a worse financial crisis and economic recession than 2008-09 if investors began doubting U.S. credit-worthiness. [ID:nN14199711]
Investors were also looking at monetary tightening measures by China to gauge the impact on demand from the world's second-largest oil consumer.
China needs to raise interest rates further to rein in inflation, which is likely to stay high in coming years due to rising global commodity prices, Li Daokui, an adviser to the People's Bank of China said on Monday. [ID:nL4E7GG072]
China has lifted bank reserve requirements eight times and raised interest rates four times since October in a bid to put a lid on rising prices.
MIDDLE EAST UNREST
A factor preventing oil prices from sliding further is the ongoing social unrest in Libya and Syria and fears that it may spread to other oil-exporting nations in the region.
NATO must broaden the range of targets it is bombing in Libya or risk failing to remove Muammar Gaddafi from power, Britain's most senior military officer was quoted as saying. [ID:nLDE74E0PI]
Up to 850 Syrians may have been killed in a two-month military crackdown and thousands of demonstrators have been arrested, the United Nations human rights office said on Friday. [ID:nLDE74C170]
The Middle East situation "is always a concern," Hasegawa said. "It is a risk factor and there is a risk premium of $10-$20 a barrel because of the unrest."
Markets were also watching the Mississippi flooding situation, a day after U.S. Army engineers opened a key spillway to relieve flooding along the river. [ID:nN15214521]
Failing to open the spillway would have put New Orleans at risk of flooding. In addition to threatening densely populated areas, lower Mississippi flooding was a risk for as many as eight refineries and at least one nuclear power plant. The refineries make up about 12 percent of the nation's capacity for making gasoline and other fuels. [ID:nN15214521] (Editing by Himani Sarkar)