London: Oil declined for a second day on Thursday towards $85 a barrel, pressured by a stronger dollar and a rise in US crude stockpiles to their highest level in nearly 10 months.
Concern about Greece’s fiscal crisis has shaken markets from commodities to equities over the past two days, boosting the value of the dollar against the euro and other major currencies as investors seek safer assets.
US crude fell 47 cents to $85.41 a barrel by 0855 GMT, while Brent crude also slid 52 cents to $85.12.
Oil in New York had rallied to an 18-month intraday peak above $87 on Tuesday after a flurry of positive US economic indicators. It climbed almost 9 percent in six sessions, before changing direction on Wednesday.
“The market had a very strong run over the last few days and it’s just taking a little bit of a breather because the US dollar went up, equity markets came down and so did crude,” said Peter McGuire, managing director of Commodity Warrants Australia in Sydney.
“Then the inventory numbers came out and it was a bit of a wake-up call,” he said. “The worries about sovereign debt in Europe are not going away.”
The dollar climbed more than 0.5% against a basket of currencies on Thursday, while the euro was close to this year’s low against the US currency.
A stronger dollar makes dollar-denominated commodities, such as oil, more expensive for holders of other currencies.
US crude stocks rose last week to their highest level in nearly 10 months as imports surged, the country’s Energy Information Administration (EIA) said on Wednesday.
But gasoline supplies fell more than expected and some analysts say the dip in prices may be short-lived.
Prices may keep rising in coming weeks as fuel demand increases in the US with the approach of the driving season from late May to early September, McGuire said.
“We wouldn’t be surprised to be close to $100 this summer,” he said.