RTRS: Oil dips below $79 as dollars, equities weigh
By Joe Brock
LONDON (Reuters) - Oil fell below $79 a barrel on Wednesday, pressured by weaker equities and a stronger dollar, and as prices struggled to break through the psychological $80 mark.
U.S. crude for December delivery fell 67 cents to $78.88 a barrel by 1035 GMT (6:35 a.m. EDT), after settling up 87 cents on Tuesday, its first rise in four days. London Brent crude dropped 67 cents at $78.88.
Oil prices rallied from below $70 a barrel on October 7 to a one-year high of $82 last Wednesday, coinciding with higher global stock indices and a weaker dollar, but oil has so far failed to hold above $80.
"The correlation with the dollar and equities has been going for some time and is still very much in play, they are all moving in close step," Simon Wardell, oil analyst at Global Insight, told Reuters.
Japan's Nikkei share average hit a two-week closing low on Wednesday, while European stock markets fell more than 1 percent, raising doubts over the pace of global economic recovery and subsequent increased demand for fuel.
The dollar strengthened against a basket of currencies .DXY on Wednesday, adding pressure to oil prices. As the dollar rises, dollar-denominated crude becomes more expensive for holders of other currencies.
EIA DATA LOOMS
U.S. crude rose more than 1 percent on Tuesday after data from the American Petroleum Institute data showed U.S. crude stocks fell by 3.5 million barrels last week, compared with a forecast for a 1.8 million barrel build in a Reuters poll.
The data also indicated, however, that U.S. gasoline and distillate supplies fell less than expected.
The API report is a precursor to numbers issued by the U.S. government's Energy Information Administration at 10:30 a.m. EDT later on Wednesday.
"Crude rose on API's (crude) decline but the gains were pared by profit-taking," said Ken Hasegawa, a commodity derivatives sales manager at broker Newedge in Tokyo.
"After oil hit $82, there are no particular economic indicators to push prices further upwards. But the downside is supported by declining inventories as we head into the peak winter season."
Crude was also supported on Tuesday by a report from MasterCard SpendingPulse showing U.S. gasoline demand rose last week -- 5.1 percent higher than year-earlier levels, shrugging off a drop in consumer confidence in the world's biggest energy user.
OPEC oil ministers said this week the producer group might raise output at a meeting in December if prices continued to rise and global crude stocks fell fast as group members were nervous about unsustainable gains in oil prices.
Analysts said they expected OPEC supplies to increase even without an official change to the group's output target, which would be likely to moderate oil price rallies.
