Oil down under 96 dollars

In afternoon trading, New York’s main contract, light sweet crude for December delivery, dropped 57 cents to 95.80 US dollars a barrel from 96.37 in US trades Wednesday.

Brent North Sea crude for December delivery fell 23 cents to 93.01 dollars.

Despite the sharp retreat from a record peak of 98.62 dollars on Wednesday, crude could still march toward the 100-dollar level due to tight global supplies and strong demand, dealers said.

The dollar’s continued weakness against the euro and other major currencies is another factor that will push investors to park their funds in commodities, they said.

“There is still a lot of momentum at the moment so there is potential for it to push through 100 dollars,” said Mark Pervan, a commodity strategist with Australia’s ANZ Bank.

“There is good enough reason, especially if the US dollar continues to fall,” he said.

A weak greenback encourages demand for dollar-priced commodities because it makes them cheaper for buyers using stronger currencies.

The dollar dived to a new record low of 1.4731 against the euro Wednesday, pressured by fears of a US recession and expectations of a further cut in interest rates.

A smaller-than-expected drop in US crude reserves was the main reason for the market’s retreat Thursday, dealers said.

The US Department of Energy’s snapshot on energy stockpiles for the week ended November 2 showed crude reserves dropped by only 800,000 barrels, confounding market expectations of a 1.8 million-barrel decline.

The DoE also said distillates, which include heating oil and diesel fuel, unexpectedly rose by 100,000 barrels last week. Analysts had expected a decline of 800,000.

The distillates report is closely watched as the world’s largest energy consumer heads into the northern hemishphere winter, when heating fuel demand typically peaks.

The report said gasoline reserves fell by 800,000 barrels, surprising analysts who had forecast they would remain stable.