Crude oil futures fell below $61 a barrel, extending their decline amid speculation that this year’s 37 percent rally is unsustainable in light of poor economic data and a stronger dollar.

The U.S. currency rose against the euro after North Korea said it conducted “successful” nuclear weapons test on Monday, spurring demand for the relative safety of the dollar and reducing the attractiveness of commodities as an inflation hedge. European stocks fell after a gauge of German business confidence rose less than economists estimated in May.
“Oil’s rally above $60 a barrel was helped by positive equity markets and a weaker dollar, while the supply-demand balance provides a very different picture,” said Harry Tchilinguirian, BNP Paribas’s senior oil-market analyst in London. “An overhang of inventories built up at sea and continuously poor economic data encourages selling because the rally looks unsustainable.”
Crude oil for July delivery fell as much as 79 cents, or 1.3 percent, to $60.88 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It traded at $60.94 at 10:43 a.m. London time.
Floor trading is shut on Monday in the U.S. for Memorial Day. Markets in London also are closed for a bank holiday.
The contract rose 1 percent to $61.67 a barrel on May 22, taking its gain for the week to 8.2 percent. Prices rose last week as the dollar fell 3.7 percent against the euro on speculation that the U.S. credit rating will be cut.
---------------Nuclear test
The dollar gained after North Korea announced the test, the second time Kim Jong Il’s regime detonated a nuclear device. The yen fell from near its highest level in more than two months, weakening to 94.97 per dollar by 10:12 a.m. in London. The dollar climbed to $1.3975 versus the euro as of 10:21 a.m. in London.
Europe’s Stoxx 600 has declined for three days after the Federal Reserve projected a deeper recession in the world’s largest economy and S&P cut the U.K.’s credit outlook.
Germany’s Ifo institute in Munich said its business climate index, based on a survey of 7,000 executives, increased to 84.2 in May from 83.7 in April. Economists expected a gain to 85, the median of 39 forecasts in a Bloomberg News survey showed. The index reached a 26-year low of 82.2 in March.
(Source: Bloomberg)