Oil slips after hitting 5-month high above $84
By Alex Lawler
LONDON (Reuters) - Oil slipped from a five-month high above $84 a barrel on Thursday on concerns that a rally driven by a weakening dollar had run ahead of the market's fundamentals of supply and demand.
A falling U.S. dollar, linked to an expected inflow of fresh dollars into the economy, has spurred money flows into oil and other commodities. Oil reversed course as the dollar pared its losses and equities slipped. .N
"It highlights the nervousness in the market about underlying fundamentals and worry the rally may be getting ahead of them," said Gene McGillian, an analyst at Tradition Energy in Stamford, Connecticut.
U.S. crude for November fell 40 cents to $82.83 by 1431 GMT, after trading as high as $84.43, the highest intraday price for a nearby contract since May 4. ICE Brent slipped 50 cents to $84.56.
"The market is very nervous and there was some profit-taking," said Christopher Bellew, an oil broker at Bache Commodities in London.
A French oil port strike that has disrupted supplies limited the decline. Talks between strikers at the Fos Lavera port and management were in deadlock, the port said as the strike entered its 11th day.
The dispute has blocked oil tankers, forced some oil refineries to reduce operations and driven up fuel prices in Europe -- supporting the wider oil market.
"It will have a very strong impact on the supply of oil products," said Christophe Barret, an oil analyst at Credit Agricole. "I think it is one of the main factors supporting product and crude oil prices."
QE2
The prospect of a second round of U.S. quantitative easing, known as QE2, hangs in part on U.S. employment reports. Closely watched monthly data are due on Friday.
In a precursor of the monthly jobs figures, ADP's national employment report on Wednesday said private employers in the U.S. cut 39,000 jobs in September, versus expectations for an increase.
New U.S. claims for unemployment benefits unexpectedly fell last week, touching their lowest level in nearly three months, according to a government report on Thursday.
The rally in oil prices may be close to running its course for now, according to some technical indicators. U.S. crude's relative strength index (RSI), at 72, is in overbought territory, which can indicate a pullback is coming.
"No doubt, many sectors are overbought, and so the upside response is looking more sluggish, but we think the more likely variable has to do with nervousness ahead of the non-farm payroll number out on Friday," MF Global commodities analyst Edward Meir said in a report.
Oil prices had gained some support from a U.S. government report on Wednesday that showed inventories of gasoline and distillates fell more than expected in the world's top consumer.
Even so, U.S. fuel inventories hit a record high earlier in September and are near a record high in the economies of the Organization for Economic Co-operation and Development.
(Additional reporting by Alejandro Barbajosa and Robert Gibbons, graphic by David Turner, Editing by Sue Thomas and Jane Baird)
