NEW YORK (MarketWatch) — Futures on West Texas Intermediate oil, the U.S. benchmark, closed below $79 a barrel for the first time since June 2012. Oil prices remain under pressure from a stronger U.S. dollar and fears Saudi Arabia could announce another price cut.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in December CLZ24, +0.04% dropped $1.76, or 2.2%, to close at $78.78 a barrel, the lowest finish for a nearby futures contract since June 28, 2012.

December Brent crude UK:LCOZ4 on London’s ICE Futures exchange fell $1.58 to $84.28 a barrel. Brent crude is widely seen as the global oil benchmark.

Oil extended an early decline after the Institute for Supply Management’s U.S. October manufacturing index rose higher than expected to a reading of 59% from 56.6% a month earlier. Economists surveyed by MarketWatch had forecast a reading of 56.5%.

The reading fueled gains by the U.S. dollar, with the ICE dollar index DXY, +0.71% , a measure of the currency against a basket of six major rivals, up 0.5% at 87.315. The dollar soared versus the Japanese yen USDJPY, +0.01% temporarily topping ¥114 to trade at its highest level since 2007. The move higher occurred after the Bank of Japan, on Friday, surprised markets by further expanding its bond-buying program.

A stronger dollar is seen as a negative for commodities priced in the currency because it makes them more expensive to users of other currencies.

Over the weekend, China’s official manufacturing PMI dropped to a five-month low of 50.8 in October from 51.1 in September. Earlier today, HSBC’s private gauge of manufacturing activity in China rose to 50.4 in October from 50.2 in September.

The numbers are consistent with cooling domestic demand and a further slowdown in growth in the fourth quarter as China’s economy is still facing downward pressure, Julian Evans-Pritchard, economist at Capital Economics said.

China is the world’s second-largest oil consumer, and sagging oil demand, due to its slowing economy, has been partly responsible for the slump in global oil prices.

Meanwhile, Saudi Arabia, the world’s biggest oil exporter, will announce its official selling prices for December this week. Last month, it slashed prices, with the deepest cuts for its Asian customers. The price cuts have triggered fears of a price war, which only has served to push global oil prices lower.

“If there is another aggressive cut for Asia, there will be loud headlines about market share battles and price wars, and it could trigger another downward leg in prices,” Societe Generale’s head of oil research Michael Wittner said.

Speculators have further reduced bullish bets on Nymex crude oil, in the week ended October 28, Commodity Futures Trading Commission data showed. Citi Futures said the latest net long exposure of 174,257 contracts was the smallest since August 2012.