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AnalysisOil slipped on Thursday from above $73 a barrel as the stiff dollar continued its upside trend on signs the U.S. economy is recovering from the worst recession since WWII, pushing down oil prices. Crude prices advanced for the second day on Wednesday, following nine consecutive sessions of decline, after the release of the EIA report which unlike the API report showed that crude inventories fell last week in the world's largest crude consumer.

The weekly energy report revealed that U.S. commercial crude oil inventories decreased by 3.7 million barrels from the previous week. At 332.4 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 0.9 million barrels last week, and are above the upper limit of the average range. Finished gasoline inventories increased while blending components decreased last week. Distillate fuel inventories decreased by 2.9 million barrels, and are above the upper boundary of the average range for this time of year.

Hence, oil is receiving support from the strong economic data from the U.S., while it is pulled back by the firm dollar. The economic data released recently form the U.S. is providing ample evidence that the largest economy in the world is on the right track towards recovery; however, the FED yesterday proffered to keep the borrowing cost near zero which will probably remain at that level in 2010 to enhance recovery.

On the other hand, the bullish dollar is eroding the appeal of the black gold as well as other dollar-denominated commodities as inflation hedges. The greenback jumped to the highest level in 3 months against a basket of major currencies as seen by the dollar index which is currently at 77.44 compared with the day's opening at 76.89.

Meanwhile, oil is traded at $72.22 recording a high of $73.10 and a low of $72.12, whereas the contract on Wednesday edged up $1.97 closing at $72.66, while recording a high of $73.55 per barrel and a low of $70.59 per barrel.

 

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