* Hit over $80 on weaker dollar
* U.S. crude inventories expected to rise
* OPEC Secretary-General says prices at $80 "a bit high"
(Updates prices, adds U.S. stocks)
By Emma Farge
LONDON, Oct 20 (Reuters) - Oil slid below the $80 a barrel
mark on Tuesday, after earlier passing it with support from a
weaker dollar, but a cautious reassessment of supply and demand
and weaker U.S. stocks tempered the rally.
The dollar hit a 14-month low against a basket of currencies
on Tuesday. [] A weak dollar makes dollar-denominated
commodities such as oil cheaper for holders of other currencies.
U.S. crude for November delivery <CLc1> touched $80.05 a
barrel in Asian trade, its highest since Oct. 14 last year, but
then retreated to $79.32 barrel by 1354 GMT, down 29 cents. The
contract expires today and the new December contract also fell
29 cents to $79.67 by the same time.
London Brent crude <LCOc1> fell 12 cents to $77.65 a barrel.
Oil prices have surged by nearly $10 since the start of
October, fuelled by strong quarterly results from bellwethers
Apple <AAPL.0> and Caterpillar <CAT.N> and general optimism
about the corporate earnings season as a sign of economic
recovery and renewed oil demand growth.
But U.S. stocks fell shortly after the open on Tuesday and
this accelerated intraday losses on oil. []
"We see little support for the rally, which is now eight
days old, and think that at some point OPEC spare capacity of
about 6 million barrels and massive on and offshore stocks will
trigger a correction phase," said JBC Energy analyst David Wech
in a research note.
OPEC Secretary-General Abdullah al-Badri said on Tuesday
that oil prices at $80 a barrel were "a bit high", but they had
helped the group revive major upstream investment projects to
create a larger supply cushion. [] []
"There was not any strong fundamental factor for the move
from $75 to $80. Now the market is looking for a fundamental
story and OPEC is starting to make some noise," said analyst
Olivier Jakob of Petromatrix.
U.S. stocks data from the American Petroleum Institute due
later on Tuesday could lead to further losses if crude
inventories rise, analysts said.
A preliminary Reuters poll of analysts forecast the data
will show a 2 million barrel build in crude stocks last week.
[]
U.S. distillate stocks, which include heating oil, are near
26-year highs and are expected to be ample even if forecasts for
below-normal temperatures materialise in the United States this
winter. []
Analysts said that if prices once again surpass $80 a barrel
the rally could gather fresh momentum because of a high density
of call options -- a contract that gives traders the option of
buying crude at a set price -- at around this level.
"Above $80 a barrel it's a question of options. There are
layers of calls at this level," said Jakob.
For a graphic showing options see below.
http://graphics.thomsonreuters.com/109/CMD_OLOPT1009.gif
