Oil falls to $81 as traders eye equities, dollar

[November 23, 2010]  SINGAPORE (AP) -- Oil prices fell to near $81 a barrel Tuesday in Asia as falling stock markets and a stronger U.S. dollar weighed on crude.

Benchmark oil for January delivery was down 50 cents to $81.24 a barrel at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. The contract fell 24 cents to settle at $81.74 on Monday.

Most Asian stock markets fell and the dollar gained Tuesday amid fears Ireland's debt crisis will spread to other financially weak European countries. Investors often look to stock markets as a gauge of overall investor sentiment while a stronger dollar makes crude more expensive for traders with other currencies.

Some analysts expect Chinese oil demand to jump to record highs by the end of the year despite recent measures to contain inflation. Improving crude demand in developed countries together with robust consumption in emerging economies should bolster prices, Goldman Sachs said.

"Underlying oil market fundamentals are much stronger than they were earlier in the year," Goldman said in a report. "We expect that these stronger fundamentals will continue to push prices higher in coming weeks."

Goldman expects oil prices to rise to $101 a barrel in 12 months.

Other analysts are less optimistic about a pick-up in oil demand in the U.S. and Europe. National Australia Bank expects crude prices to average in the $80s in every quarter through 2012.

"A dramatic decline in inventory is unlikely with demand conditions in most advanced economies expected to be sluggish for some time," NAB said in a report.

In other Nymex trading in December contracts, heating oil fell 1 cent at $2.26 a gallon and gasoline dropped 2 cents to $2.13 a gallon. Natural gas slid 1.1 cents $4.26 per 1,000 cubic feet.

In London, Brent crude dropped 58 cents to $83.38 a barrel on the ICE Futures exchange.

[Associated Press; By ALEX KENNEDY]

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