NEW YORK (MarketWatch) -- Oil futures edged lower Friday, after rallying 12% in the previous six sessions, as modest dollar strength and falling U.S. stock markets encouraged energy traders to lock in some of their recent gains.
Crude oil for November delivery fell 26 cents, or 0.3%, to $77.32 a barrel on the New York Mercantile Exchange. The contract climbed to $78.17 a barrel earlier, the highest level for a front-month contract since October 2008.
The recent rally in crude prices is not fully supported by fundamentals, with demand in the U.S. still "lackluster," said analysts at Credit Suisse in a note.
They expect crude prices to revert back to their "familiar price range of $68-$75 in the coming days."
The Energy Information Administration reported Thursday that petroleum demand still remained weak in U.S. with gasoline demand falling to 9.26 million barrels a day, down slightly from a week ago.
The EIA also reported a surprisingly big drop in gasoline inventories as refineries cut production to the lowest level in more than a year. See Thursday's Futures Movers.
"Cues for a rebound in the underlying demand on the oil market are missing," wrote analysts at Commerzbank in a note to clients. "Hence, we remain skeptical about the sustainability of the price increase."
Because of positive market sentiment, however, the oil price is likely to rise further in the short term and could reach $80 a barrel during the next days, they said.
On Wall Street, stocks moved broadly lower Friday, with disappointing results from Bank of America Corp. and General Electric Co.
weighing.
In the currency markets, the dollar gained against most of its major rivals, weighing on dollar-denominated commodities such as oil.
The dollar index , which measures the performance of the greenback against a basket of other major currencies, rose 0.3% to 75.705.
In other energy trading Friday, November reformulated gasoline fell 0.1% to $1.9429 a gallon and November heating oil slid 0.1% to $2.016 a gallon.
November natural-gas futures rose 4.4% to $4.683 per million British thermal units.
The United States Oil Fund was almost flat, and the United States Natural Gas Fund gained 2.1%.
