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Oil market falls as dollar rallies

London - World oil prices fell Thursday on the back of the surging dollar and plentiful global supplies, analysts said.

Brent North Sea crude for delivery in November dropped 31 cents to stand at $96.64 a barrel in London afternoon deals.

The contract had dived Wednesday to $95.60 - the lowest level since early July 2012 - on worries over abundant oil supplies and a weaker demand outlook - before pulling back on official data showing a surprisingly heavy drop in US crude inventories.

Elsewhere Thursday, US benchmark West Texas Intermediate for November retreated 17 cents to $92.63 a barrel.

"The predominant driver... remains buoyant supply combined with weakening global demand and a gaining dollar value," said Dorian Lucas, analyst at British-based energy consultancy Inenco.

The euro plunged Thursday to a near two-year low of $1.2697 on fresh worries over the health of the stuttering eurozone economy.

The dollar also won support from growing expectations that US interest rates could rise sooner than expected, analysts said.

The rising greenback makes dollar-priced commodities like oil more expensive for buyers using weaker currencies, dampening demand.

Oil price losses were capped on Thursday thanks to the previous day's news of a surprise drawdown in US stockpiles.

Sanjeev Gupta, head of the Asia-Pacific oil and gas practice at business consultancy EY, said "a higher-than-forecast" reduction in crude reserves boosted demand hopes in the US.

The Department of Energy said Wednesday that US crude inventories dived 4.3 million barrels in the week ending September 19, confounding analysts' projections of an increase.

The DoE report also showed gasoline stockpiles decreased 414 000 barrels, more than double the decline forecast.

A drop in US stockpiles typically indicates stronger demand in the world's biggest economy and top crude consumer, and therefore tends to support global prices.

Gupta added that "economic data from the US on durable goods and final second-quarter gross domestic product (GDP) numbers will set the tone for prices" on Thursday and Friday.

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