Oil Steadies Near $97, Weak US Dollar Supports

Oil edged lower to around $97 a barrel on Thursday, after falling just shy of the $100 milestone the previous session, as the market continued to watch the U.S. dollar which tumbled to fresh record lows.

Oil Refinery
Oil Refinery

U.S. light crude for January delivery was down 35 cents at $96.90 a barrel by 1628 GMT. Oil briefly surged to a lifetime peak of $99.29 a barrel on Wednesday, before settling 74 cents lower.

London Brent crude was 24 cents lower at $94.59 a barrel.

"Because of the (U.S.) Thanksgiving holiday it will probably be relatively quiet," said Simon Wardell, analyst at Global Insight.

NYMEX floor trading will be closed on Thursday for the Thanksgiving holiday, although Globex electronic trade continued as normal.

Oil has been rising inversely to the dollar over the past months amid a fever of speculative trading and tightening stocks ahead of the winter.

The dollar hit a record low against the euro, the Swiss franc and a basket of currencies on Thursday, as the market anticipated that the Federal Reserve would deliver an interest rate cut next month.

A mixed U.S. inventory report cut short oil's rally towards $100 on Wednesday.

Crude stocks at the delivery point for U.S. crude futures in Cushing, Oklahoma, rose 1.2 million barrels to 14.6 million barrels last week, overshadowing an overall drawdown in U.S. crude stocks.

"The inventory increase at this key physical delivery point of the NYMEX crude oil contract obviously caught the market somewhat flat-footed, leading to the price pullback," First Energy Capital said in its daily market statement.

The U.S. government showed a larger-than-expected 2.4 million-barrel drop in distillate stocks, which include heating oil and diesel fuel, ahead of chilly winter in the U.S. northeast.