AnalysisOil hovers above $70 a barrel on Thursday, after falling for six consecutive sessions, as the dollar's decline spurred demand on oil as a hedge against inflation.   

Prices are continuing their downside fall at the end of the year, where some investors are closing positions and others are locking profits after the black gold's rebound from a low of $33 a barrel to above $81 a barrel. Yesterday, crude prices fell to 2-month low after the downbeat EIA figures.

The weekly EIA report released on Wednesday, showed that U.S. commercial crude oil inventories decreased by 3.8 million barrels from the previous week. At 336.1 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 2.2 million barrels last week, and are above the upper limit of the average range. Both finished gasoline inventories and blending components inventories increased last week. Distillate fuel inventories increased by 1.6 million barrels, and are above the upper boundary of the average range for this time of year.

Unlike the API report released on Tuesday; the EIA suggested that demand on energy in the U.S. slipped last week, despite the recovery signs in the biggest economy in the world.

On the other hand, the U.S. dollar is showing a slight decline for the second day against a basket of major currencies, as indicated by the dollar index, which slipped to 75.95 compared with the day's opening at 76.00. Concerns in markets are boosting demand on the dollar and yen as refuges; however, the greenback after rising for 5 days it plunged the previous day and today as a downside correction may give oil the chance to rebound again.

Moreover, Saudi Arabia, the world's top crude producer; announced that it will increase oil supplies for refiners in China, South Korea, and Japan in January. But the largest producer in OPEC, mentioned that volumes to other traders will remain unchanged. A price range of $70 to $80 a barrel is satisfying for OPEC that said it will not increase production in their coming meeting on December 22 in Angola.   

Currently, oil is traded at $70.87 recording a high of $71.20 and a low of $70.42; whereas the contract on Thursday shed $1.95 closing at $70.67, while recording a high of $73.87 per barrel and a low of $70.13 per barrel.