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SINGAPORE: Oil retreated modestly in Asian trade on Thursday after overnight gains that were fuelled by the weakening dollar, analysts said.New York’s main contract, light sweet crude for September delivery eased 32 cents to 71.65 dollars a barrel.
Brent North Sea crude for September delivery dropped 37 cents to 75.14 dollars barrel.
Both contracts closed stronger Wednesday as investors returned to commodities including oil, drawn by the weakening US currency which makes crude futures an attractive investment option.
Crude futures are priced in the US currency and become cheaper when the dollar falls.
The euro surged from 1.40 dollars last Friday to above 1.44 dollars, climbing to its highest level since December at 1.4445 dollars on renewed hopes of a global economic recovery.
In late Wednesday US trade, the euro traded at 1.4411 dollars.
The dollar is seen as a safe-haven currency and tends to do better during times of economic uncertainty, while the riskier euro generally rises when investors feel upbeat about the global economy.
“The US currency has come under pressure from the rise in oil prices, although we expect the latter to fall back,” analysts from London-based Capital Economics consultancy said.
“The rally in oil prices is likely to falter. Many forecasts still seem to be overly influenced by the boom that started in 2004.
“But final demand is set to remain weak for years.”
Data released Wednesday by the US Department of Energy (DoE) painted a mixed picture of oil demand in the United States, the world’s biggest energy user.
The widely monitored DoE report said US crude oil stockpiles soared by 1.7 million barrels in the week ending July 31, three times more than the average analyst projection.
Inventories of distillates, which include diesel and heating fuel, sank by 1.1 million barrels, instead of the 900,000-barrel increase expected.
Gasoline reserves fell by 200,000 million barrels, far less than the drop of 1.3 million barrels anticipated.