VIENNA - OIL prices fell to near US$71 (S$98) a barrel Friday, giving up part of the previous day's big gains, as the U.S. dollar rebounded - making commodities more expensive for investors.
Not even a bullish report on demand from the International Energy Agency could support crude. The Paris-based IEA, which advises oil-consuming countries, said crude demand would reach 86.1 million barrels a day in 2010, up 1.7 percent from this year. That's up from the IEA's forecast last month for oil demand of 85.7 million barrels a day in 2010.
Benchmark crude for November delivery was down 43 cents at US$71.26 by midday European electronic trading on the New York Mercantile Exchange. The contract added US$2.12 to settle at US$71.69 on Thursday. Oil has bounced in a range between US$65 and US$75 for months amid signs a recovery of the US economy could be slow and uneven.
A weakening dollar has recently helped support crude prices - being traded in dollars, commodities become more attractive to investors when the US currency drops. Oil is also bought to protect against the risk of inflation.
'People are using crude and gold as an inflation hedge because the US is just printing money,' said Clarence Chu, a trader at market maker Hudson Capital Energy in Singapore. 'There's definitely been a negative correlation between the dollar and oil.'
'The dollar is grotesquely weak, and that is reason enough not to be short oil,' despite stocks being high, said trader and analyst Stephen Schork in his Schork Report. On Friday, the dollar rebounded somewhat, weighing on oil prices. -- AP
