Crude oil fell as the dollar climbed after Federal Reserve Chairman Ben S. Bernanke said monetary policy will be tightened once the economy improves. Oil pared its gains for the week as the U.S. currency rose against the euro and yen, damping the investment appeal of commodities including gold. The International Energy Agency increased its forecast for 2010 global oil demand for a third month, citing a stronger outlook for the world economy. “Bernanke’s comments were supportive for the dollar and that’s the main reason oil is down today,” said Phil Flynn, vice president of research at PFGBest in Chicago. “An improving IEA forecast was widely anticipated. The report may be a bearish factor because the increase isn’t that large.” Crude oil for November delivery fell 76 cents, or 1.1 percent, to $70.93 a barrel at 12:01 p.m. on the New York Mercantile Exchange. Prices are poised for a 1.4 percent gain this week. Futures have risen as much as 55 cents and dropped as much as $1.07 during today’s session. The dollar rose to $1.4685 per euro from $1.4794 in New York yesterday after Bernanke’s comments. The U.S. currency climbed 1.7 percent to 89.85 yen from 88.39. Oil climbed earlier today as U.S. equities increased for a fifth day. The Standard & Poor’s 500 Index rose was little changed at 1,065.88 after rising as much as 0.4 percent to 1,069.32 earlier. “When you don’t get a clear direction from other markets oil is going to flip-flop,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis. “The fact that you aren’t getting a strong reaction to the friendly numbers from the IEA is a signal that we will have a hard time staying at these levels.” Rising Demand Global oil consumption is likely to average 86.1 million barrels a day next year, 350,000 barrels a day more than the IEA previously estimated, the adviser to 28 nations said today in its monthly report. The agency also raised its estimate for consumption this year to 84.6 million barrels a day. “We’re looking at a fairly robust rebound in demand next year,” David Fyfe, head of the IEA’s oil industry and markets division, said by phone. “Things are looking more positive in the economy, which will tend to feed into oil demand.” While the Organization of Petroleum Exporting Countries has pledged to adhere more closely to output cuts of 4.2 million barrels a day agreed to last year, some members are bolstering production, according to the IEA. Supplies from the 11 members subject to quotas, all except Iraq, rose by 170,000 barrels a day in September, to 26.42 million barrels a day. That’s about 1.58 million barrels a day more than the 24.845 million target. Ample Stockpiles “The dollar has been very important recently,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “The dollar may be close to a bottom, which will take away a prop of this market. Even with a weak dollar it’s hard to justify $71 oil because distillate supplies are huge, and gasoline and crude supplies are high.” U.S. distillate fuel inventories rose 679,000 barrels to 171.8 million last week, leaving stockpiles at their highest level since January 1983, an Energy Department report showed Oct. 7. Gasoline inventories climbed 2.94 million barrels to 214.4 million. Oil may decline next week as fuel supply climbs, a Bloomberg survey showed. Eleven of 29 analysts and traders, or 38 percent, said futures will drop through Oct. 16. Ten respondents, or 34 percent, forecast the market will rise and eight said prices will be little changed. Brent crude oil for November settlement dropped 66 cents, or 0.8 percent, to $69.20 a barrel on the London-based ICE Futures Europe exchange.

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