By Polya Lesova & Moming Zhou, MarketWatch
NEW YORK (MarketWatch) -- Oil futures declined Thursday as a stronger dollar weighed on dollar-denominated oil prices while the market awaited government data that's expected to show a buildup in U.S. crude inventories.
Traders shrugged off positive data, including an International Energy Agency report that revised higher the agency's view of global oil demand, and a U.S. report that applications for jobless benefits fell last week to the lowest level since early January.
On the New York Mercantile Exchange, crude oil for December delivery fell $1.76, or 2.3%, to $77.53 a barrel.
"A stronger dollar and expectations for a build to stockpiles appear to be the immediate rationale" behind oil's losses, said Michael Fitzpatrick, an analyst at MF Global.
"The oil price is struggling to break through the threshold of $80 a barrel," wrote analysts at Commerzbank in a note to clients. "We view this as a sign of relative weakness and expect lower prices over the next weeks."
The number of people filing initial claims for state unemployment benefits fell by 12,000 to a seasonally adjusted 502,000 in the week ended Nov. 7, the Labor Department reported Thursday. See jobless report.
And the Paris-based IEA revised higher its global oil demand outlook for 2009 and 2010, citing "surging" Chinese and Saudi Arabia demand and somewhat higher-than-anticipated U.S. data.
Chinese growth reflects stimulus-induced infrastructure spending and the Saudi demand is for power generation rather than industrial production, it said. For the first time since the second quarter of 2008, the IEA sees quarterly demand rising in the fourth quarter.
It upped its 2009 view by 210,000 barrels a day to 84.8 million barrels a day, and upped its 2010 view by 140,000 barrels to 86.2 million barrels a day.
Energy analyst Jacques Rousseau of Soleil Securities said Thursday the International Energy Agency's monthly Oil Market Report for November amounts to a slight negative for crude oil prices since the demand growth forecast for 2010 was reduced modestly.
In currencies trading, the dollar rebounded from 15-month lows. The dollar index (DXY 75.51, +0.35, +0.46%) , which tracks the performance of the greenback against a basket of other major currencies, was up 0.5% at $75.555.
The Energy Information Administration will report its closely watched inventory data at 11 a.m. Eastern on Thursday -- a day later than usual because of the Veterans Day holiday.
Analysts polled by Platts expect a buildup of 1 million barrels in commercial crude stocks. They also project an increase of 700,000 barrels for gasoline and a decline of 900,000 barrels for distillates on the week.
Refinery utilization is projected to have edged up 0.4 of a percentage point, to 81%, in the latest week.
In other energy trading, December gasoline lost 2% to $1.9543 a gallon, and December heating oil fell 2.4% to $2.0068 a gallon.
December natural gas dropped 2.7% to $4.381 per million British thermal units.
The EIA will report last week's natural gas inventories Friday. Analysts polled by Platts expect a buildup of 29 to 33 billion cubic feet.
