Oil prices fell towards $71 a barrel today, trimming an overnight gain of 3 per cent, as the battered US dollar firmed after US Federal Reserve chief Ben Bernanke pointed to the chances for tighter monetary policy.
US crude for November delivery edged down 56 cents to $71.13 by 0314 GMT, after having closed $2.12 higher at $71.69 a barrel yesterday.
London Brent crude fell 60 cents to $69.17 a barrel.
In comments that supported the dollar, Mr Bernanke indicated monetary policy might have to be tightened as an economic recovery takes hold, adding that the Fed could remove its easy money policies even while its balance sheet remained bloated.
A weaker dollar supports oil because dollar-priced commodities become cheaper for buyers using other currencies.
Adding to the strength, Kuwait's finance minister said yesterday oil trading would remain in US dollars, the latest denial of a report this week of a move to replace the world's reserve currency with a basket of currencies.
A poorly received US bond auction that capped gains in Asia-Pacific stocks markets was seen as a factor for lower crude oil prices.
The US government sold $12 billion worth of 30-year bonds yesterday as the dollar fell to a 14-month low against a broad basket of currencies, which could have tempered appetite for US assets.
Higher OPEC seaborne oil exports, excluding Angola and Ecuador, also weighed on the market. Such exports will rise 160,000 barrels per day (bpd) in the four weeks to October 24th, to 22.65 million bopd, according to Roy Mason, an analyst at British consultancy Oil Movement.
While lower US unemployment claims signalled a stabilising labour market, brimming fuel inventories in the world's top energy user remained a concern.
The US Energy Information Administration reported gasoline stocks leapt 2.9 million barrels last week, nearly three times the build that analysts had expected.
Distillate stocks -- which include diesel and heating oil -- rose by 700,000 barrels, more than double the forecast 300,000-barrel build.
