Oil fell as the dollar firmed today, sliding from an 18-month high near $87 reached a day earlier on data showing US economic growth was accelerating.
The US services sector grew at its swiftest in nearly four years in March and future home sales rose unexpectedly in February, statistics showed yesterday, bolstering hopes for a sustainable economic recovery and job growth.
US crude for May delivery slid 24 cents to $86.38 by 0505 GMT, off yesterday's high of $86.90 a barrel, the highest intraday figure struck since October 2008. ICE Brent declined 28 cents to $85.60 today.
"I don't think that the fundamentals necessarily justify such a high price, but the underlying tone in the market remains very positive," said David Moore, Commodity Strategist at the Commonwealth Bank of Australia in Sydney.
"One big factor is that the US dollar is stronger in trading today and that has been an important influence on the oil price," Mr Moore said, referring to the inverse correlation between the currency and crude.
The dollar gained nearly 0.4 per cent against a basket of currencies today. A stronger greenback renders imports of dollar-denominated commodities more expensive for buyers other than the US.
Oil prices rose more than 8 per cent in the five sessions to yesterday, their sharpest five-day winning streak this year. There was no trading on the New York Mercantile Exchange on April 2nd because of Good Friday.
"It simply rose so quickly in trade affected by the Easter holidays that I suspect we are just seeing some correction from the very strong run-up in recent days," Mr Moore said.
Attention in the oil market was set to shift to U.S inventory statistics due out later today and tomorrow.
Crude stockpiles were forecast to have risen 1.7 million barrels, the Reuters poll showed, while a 1.4 million drawdown was expected in both gasoline supplies and distillate stocks, comprising heating oil and diesel.
The American Petroleum Institute will release its industry report today, at 4.30pm EDT (2030 GMT), followed by government figures from the US Energy Information Administration on Wednesday at 10.30am EDT.
"I think prices ultimately may return to the high 70s and low 80s over the course of this year," Mr Moore said. "But for now, the ability for it to spike further is there."
Reuters