AnalysisCrude oil slipped on Thursday as the U.S. dollar rebounded from its drop and as some traders close their positions after yesterday's gains.

Prices fell below $78 a barrel as the green currency pared some of this week losses as indicated by the dollar index which is currently at 74.52 compared with Wednesday's closing at 74.25. The greenback slumped after the better-than-expected U.S. data released yesterday showing the economy is on the right track. Also, the Federal currency faced more pressure after the FOMC minutes had shown that the dollar's depreciation is Orderly and amid speculation the interest rate would remain low till mid 2010, thereby sending the dollar to 15-month low against the euro and 14-year low versus the yen.

On the other hand, some traders preferred to close their positions for Thanksgiving Holiday in the U.S. and after the high gains recorded overnight where oil prices advanced 2.6%, the highest since November 16. Yesterday's spike encouraged investors to take profits.

The previous day, the EIA report was released showing that U.S. commercial crude oil inventories increased by 1.0 million barrels from the previous week. At 337.8 million barrels, U.S. crude oil inventories are above the upper limit of the average range for this time of year. Total motor gasoline inventories increased by 1.0 million barrels last week, and are slightly above the upper limit of the average range. Both finished gasoline inventories and blending components inventories increased last week. Distillate fuel inventories decreased by 0.5 million barrels, and are above the upper boundary of the average range for this time of year.

The weekly energy report showed a slowdown in demand on oil, in line with the API report released on Tuesday. Despite the upbeat data released recently, there are skeptics with regard recovery. Oil demand improved in China and is expected to grow 3.5% annually till 2030, but prices are not anticipated to rally next year, according to the IEA forecasts.

In stock markets, U.S. equities advanced overnight after the stellar data, while in Asia shares dropped as the stronger yen dimmed the earnings outlook for Japan’s electronics and auto companies.

Oil is currently traded at $77.12 recording a high of $77.90 and a low of $76.82, whereas the contract on Wednesday edged up $1.94 closing at $77.96, while recording a high of $78.09 per barrel and a low of $75.50 per barrel.