Oil slips below $81, retreating from 2009 high

[October 22, 2009]  SINGAPORE (AP) -- Oil prices slipped below $81 a barrel Thursday, retreating from a 2009 high, as a wobbly U.S. dollar steadied in Asian trading.

Benchmark crude for December delivery fell 90 cents to $80.48 a barrel at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange.

The contract rose $2.25 to settle at $81.37 on Wednesday as the dollar fell to its lowest since August 2008. Crude is traded using dollars, so it gets cheaper when the U.S. currency falls.

The euro fell to $1.4959 on Thursday from 1.4999 the previous day and the dollar rose to 91.46 yen from 91.00.

Traders also eyed a smaller than expected rise in U.S. crude supply data from the Energy Information Administration on Wednesday. Inventories rose 1.3 million barrels while analysts had expected a rise of 2.2 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

The two-week surge in the oil price has raised the specter that a jump in energy costs would fuel inflation and lead policymakers to ease stimulus spending and raise interest rates, undermining a nascent global economic recovery.

"It's definitely a potential threat," said David Cohen, director of Asian economic forecasting for consultancy Action Economics. "Everybody gets a little nervous when the oil price starts bouncing higher."

Energy Secretary Steven Chu said earlier this week that crude prices at $80 per barrel are worrisome.

Stock markets, which have soared since March, could see gains reversed if oil and other commodities continue to rally, Cohen said.

"The recovery is not so fragile that it can't tolerate another dollar or two in the oil price," Cohen said. "But when people start getting worried about inflation, that could be a drag on markets."

In other Nymex trading, heating oil fell 1.49 cents to $2.09 a gallon. Gasoline for November delivery dropped 1.65 cents to $2.04 a gallon. Natural gas for November delivery rose 2.6 cents to $5.13 per 1,000 cubic feet.

In London, Brent crude for December delivery fell 81 cents to $78.88 on the ICE Futures exchange.

[Associated Press; By ALEX KENNEDY]

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