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Vienna - Oil prices fell to near $71 a barrel on Friday, giving up part of the previous day's big gains, as the US dollar rebounded - making commodities more expensive for investors.
Not even a bullish report on demand from the International Energy Agency could support crude. The Paris-based IEA, which advises oil-consuming countries, said crude demand would reach 86.1 million barrels a day in 2010, up 1.7% from this year. That's up from the IEA's forecast last month for oil demand of 85.7 million barrels a day in 2010.
Benchmark crude for November delivery was down 54 cents at $71.15 by afternoon European electronic trading on the New York Mercantile Exchange. The contract added $2.12 to settle at $71.69 on Thursday.
Oil has bounced in a range between $65 and $75 for months amid signs a recovery of the US economy could be slow and uneven.
A weakening dollar has recently helped support crude prices - being traded in dollars, commodities become more attractive to investors when the US currency drops. Oil is also bought to protect against the risk of inflation.
"People are using crude and gold as an inflation hedge because the US is just printing money," said Clarence Chu, a trader at market maker Hudson Capital Energy in Singapore. "There's definitely been a negative correlation between the dollar and oil."
"The dollar is grotesquely weak, and that is reason enough not to be short oil," despite stocks being high, said trader and analyst Stephen Schork in his Schork Report.
On Friday, the dollar rebounded somewhat, weighing on oil prices. The euro fell to $1.4722 on Friday from $1.4791 the previous day, and the dollar rose to ¥89.18 from 88.37.
Oil prices will likely trade near $70 until there are more positive economic signs, such as job creation, Chu said.
"There hasn't been a strong signal that the economy is recovering," Chu said. "There are still job losses every month."
The US unemployment rate rose to 9.8% in September, the highest since 1983.
In other Nymex trading, heating oil slipped by less than a penny to $1.84 and gasoline by over a cent to $1.77 a gallon.
Natural gas for November delivery lost mre than 7 cents to fetch $4.89 per 1 000 cubic feet.
In London, Brent crude fell 43 cents to $69.34 on the ICE Futures exchange.
- AP