(Recasts after U.S. weekly crude stocks data, updates prices)
By Santosh Menon
LONDON, Feb 27 (Reuters) - Oil eased towards $100 a barrel
on Wednesday, reversing course from an early rally to record
peaks after U.S. data showed a higher-than-expected rise in
crude and gasoline stocks last week.
U.S. crude <CLc1> stood 55 cents down at $100.32 a barrel by
1603 GMT. London Brent <LCOc1> was 55 cents down at $98.92, off
a record high of $100.53 hit earlier in the session.
U.S. oil earlier rallied to a new record of $102.08 a
barrel, near its inflation-adjusted lifetime peak of $102.53, as
a plunging U.S. dollar triggered a surge across commodities
markets that are viewed as safe havens.
But U.S. government data showing substantial builds in crude
oil and gasoline stocks once again raised concerns about the
economy of the world's biggest oil consumer, and with it the
prospects of future oil demand.
Crude oil stocks rose by 3.2 million barrels last week
against expectations of a 2.5 million barrels build. Gasoline
stocks jumped 2.3 million barrels against an expected 300,000
barrels increase, taking inventories to their highest level in
14 years.
"If you look at this report in isolation from what is going
on with the dollar, it's pretty bearish. But the market can't
take much focus off the dollar," said Amanda Kurzendoerfer at
Summit Energy in Kentucky.
Mike Fitzpatrick at MF Global said: "This report should be
enough to weigh down the market, but there is a lot of
speculative money pouring into this market. Participants in this
market are obviously focusing on more than just fundamentals."
WEAK DOLLAR
Oil's rally earlier on Wednesday came as the dollar slumped
to an all-time low against the euro as well as a basket of major
currencies as data from the United States highlighted a gloomy
outlook for the U.S. economy, raising the spectre of more rate
cuts.
A weak dollar can trigger commodities buying as investors
seek to preserve their nominal value in other currencies.
The price of oil has risen nearly 66 percent in the past
year in U.S. dollar terms, whereas in terms of euros, the rise
has only been around 47 percent.
Analysts and investors also said that the U.S. was seeing a
sharp increase in inflation, after data showed that producer
prices rose 1 percent in January and by 7.4 percent on an annual
basis, the biggest 12-month gain in more than 26 years.
"In this climate, therefore, people tend to buy real assets
like oil and gold," said Colin Morton, investment director at
Rensburg Fund Managers.
Most commodities markets pushed higher on Wednesday with
gold hitting a new record high, and copper, aluminium and silver
also hovering near multi-year peaks, underscoring their
attraction to investors as a hedge against the dollar and an
alternative to other financial markets.
Oil has also lately been supported by growing winter fuel
demand in the United States and Europe amid falling temperatures
and by indications from OPEC that the exporter group will not
increase production at its meeting next week.
On Tuesday, OPEC's president said members would agree not to
raise production, in part because of fears of a demand slowdown.
(Additional reporting by Luke Pachymuthu in Singapore and Jane
Merriman in London; Editing by Anthony Barker)
