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Oil falls from 1-yr high over US$80, US data weighs

OIL fell yesterday after hitting a one-year high over US$80 a barrel, as disappointing US data on housing starts and inflation weighed on markets.

New construction of US homes rose less than expected in September, while US producer prices declined unexpectedly, largely due to a drop in energy prices.

US crude for November delivery fell US$1.45 to US$78.16 a barrel at 12:34 pm EDT (1634 GMT), after rising to US$80.05 a barrel earlier, its highest since Oct. 14 last year.

Traders said the weak US data spurred profit taking ahead of the November contract's expiry later yesterday.

London Brent crude fell US$1.23 to US$76.54 a barrel.

Oil prices have surged nearly US$10 in October, as strong company results fueled optimism that a strong corporate earnings season will signal economic recovery.

Oil traders have looked to equities and macroeconomic data for signs of a turnaround that could boost fuel demand.

US stocks fell as the lackluster housing data outweighed positive results from bellwether companies such as Apple and Caterpillar.

The dollar rebounded from a 14-month low against a basket of major currencies, with the euro falling below US$1.49 after failing to breach options-related barriers around US$1.50.

"The dollar strengthening coupled with the stock market slide pulled crude lower after it hit US$80. And there may be profit taking after eight straight sessions higher," said Dan Flynn, analyst at PFGBest Research in Chicago.

Analysts said that if prices again surpass US$80 a barrel, the rally could gather 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.


US Energy Secretary Steven Chu expressed concern about rising oil prices possibly hurting an economic rebound.

"Even US$80 is making me nervous," he told the Reuters Washington Summit, adding the government of the world's top fuel consumer would prefer stable prices to volatilie prices for the sake of economy.

OPEC Secretary-General Abdullah al-Badri said oil prices at US$80 a barrel were "a bit high," but they had helped the group revive major upstream investment projects to create a larger supply cushion.

The market was also awaiting direction from the US inventory due out later Tuesdy from the American Petroleum Institute, and from the US Energy Information Administration on Wednesday.

A preliminary Reuters poll of analysts forecast the data will show a 2 million barrel build in crude stocks last week.

US distillate stocks, which include heating oil, are near 26-year highs and are expected to be ample even if forecasts for below-normal temperatures materialize in the United States this winter.


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