Oil dropped towards $79 a barrel today after a steep decline in US crude inventories sent prices up 1 pe rcent the previous day, as traders look to the fall in equities markets and firming dollar to take profits.
The US dollar inched up as short-term investors sold into a rally in the euro and higher-yielding currencies such as the Australian dollar, following a repeated pledge by the US Fed to keep rates low for a while.
US crude for December fell 71 cents to $79.69 a barrel earlier this morning after settling up 80 cents on Wednesday.
London Brent crude lost 71 cents to $78.18 a barrel.
Crude oil futures rose above $81 a barrel yesterday after the US government Energy Information Administration (EIA) data showed a big drop of four million barrels, in the week to October 30th, versus analysts' expectations for an increase.
Gasoline stockpiles also fell, down 300,000 barrels, against forecasts for a slight build, while distillates dropped a less-than-expected 400,000 barrels, the EIA said.
Traders said the fall in oil prices today was driven by the weak stock markets in Asia, with Japan's Nikkei average down 1.3 percent and Hong Kong's Hang Seng index retreated a nearly 1 per cent.
Energy traders have closely watched economic data and share markets this year for signs of economic recovery that could boost flagging oil demand.
Wall Street initially rallied after the Federal Reserve said it would keep rates near zero for "an extended period" even as it expressed confidence in the recovery, but soon lost steam as investors turned their eyes to jobs data due out on Friday.
US employers in October cut payrolls by the least amount in 14 months as the economy's resumption of growth boosted optimism, but the jobless rate rose to a fresh 26-year high, a Reuters survey predicts.
Reuters