Oil fell more than 1 per cent to trade below $77 a barrel today ahead of the Thanksgiving holiday, after rising 2 per cent the previous day on a weakening dollar and a lower-than-expected build in US crude stocks.
The US dollar index fell to a 15-month low against a basket of six currencies yesterday, as data suggesting the US jobs and housing markets were stabilising boosted Wall Street and overall risk appetite, denting safe-haven demand for the dollar.
But sentiment was dampened after China's key stock index sank 3.62 percent in heavy afternoon trade, as investors fled the market amid mounting worries the government may take steps to clamp down on surging asset prices.
Some last-minute liquidation of positions ahead of the long weekend also contributed to crude's fall below $77 in afternoon trade.
US crude for January delivery sank 98 cents to $76.98 a barrel, after falling by more than $1.00 to as low as $76.85. London Brent crude was down 77 cents at $77.67.
The US Energy Information Administration's (EIA) inventory report released yesterday showed crude stockpiles rose 1 million barrels in the week to November 20th, marginally less than analysts' forecasts of a 1.2 million-barrel build.
The figure was also lower than a Tuesday report by the American Petroleum Institute (API) that showed crude stocks rose 3.3 million barrels.
Oil markets have increasingly looked to economic data this year for signs of a global recovery to boost flagging demand.
Oil prices have more than doubled from below $33 in December, but remain 47 per cent below the record of more than $147 hit in July 2008. Prices have risen amid rallying equity markets and a weaker greenback makes crude more attractive for foreign currency holders.
Reuters