Oct. 22 (Bloomberg) -- Crude oil declined as the dollar strengthened against the euro, reducing demand for commodities as an alternative investment. Oil retreated from a one-year high as the dollar advanced after China’s economic growth missed some analysts’ forecasts. Investors buy dollar-priced commodities to hedge against a weaker U.S. currency. “The dollar was a key driver yesterday for the crude market,” Frank Schallenberger, head of commodities research at Landesbank Baden-Wuerttemberg, said by phone from Stuttgart. “The dollar is stronger today, that’s why crude is down.” Crude oil for December delivery fell as much as $1.47, or 1.8 percent, to $79.90 a barrel in electronic trading on the New York Mercantile Exchange. It was at $80.24 a barrel at 11:35 a.m. London time. Prices have risen almost 80 percent so far this year as a recovery in stock markets emboldened investors and the sliding dollar prompted buying of commodities. The U.S. dollar dropped yesterday to $1.5046 against the euro, the weakest level since August 2008. The U.S. currency strengthened today to $1.4971 at 10:58 a.m. in London. The U.S. Department of Energy said yesterday the country’s refiners operated at 81.1 percent of capacity last week, down from 85.6 percent a month ago. Refinery runs are well below their historical average, which is distorted by October hurricanes, Calyon analyst Christophe Barret wrote in a report. “This year, the sharp drop is due to demand -- not weather -- conditions,” he said. U.S. Inventories Brent crude oil for December settlement fell as much as $1.34, or 1.7 percent, to $78.35 a barrel on the London-based ICE Futures Europe exchange. It was at $78.59 a barrel at 11:34 a.m. London time. The Department of Energy report showed a second weekly increase in crude stocks. Inventories of crude oil rose 1.31 million barrels to 339.1 million, the highest level since August, the report showed. Gasoline stockpiles dropped 1.1 percent to 206.9 million barrels last week, the report showed. This was more than the 850,000 barrels decrease forecast in a Bloomberg survey before the report. Supplies of distillate fuel, a category that includes heating oil and diesel, fell 784,000 barrels to 169.9 million, according to the department. Supplies were forecast to decrease by 1 million barrels. “Product stocks remain more than ample, in particular for distillates,” Barret wrote. U.S. distillate inventories are currently about 34 percent above last year’s level. To contact the reporters on this story: Rachel Graham in London rgraham13@bloomberg.net

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