Oil slips below $81, retreating from 2009 high

Oil prices slipped below $81 a barrel Thursday, retreating from a 2009 high, as a wobbly U.S. dollar steadied against other currencies.

Because commodities are traded in dollars, a strengthening U.S. currency makes them more expensive — and less attractive — to international investors.

By mid-afternoon in Europe, benchmark crude for December delivery was down 75 cents to $80.62 a barrel in electronic trading on the New York Mercantile Exchange.

The contract rose $2.25 to settle at $81.37 on Wednesday as the dollar fell to its lowest since August 2008. Crude is traded using dollars, so its price goes down when the dollar goes up.

The euro fell to $1.4983 on Thursday from $1.4999 the previous day and the dollar rose to 91.32 Japanese yen from 91.00 yen.

Traders also eyed a smaller than expected rise in U.S. crude supply data from the Energy Information Administration on Wednesday. Inventories rose 1.3 million barrels while analysts had expected a rise of 2.2 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

"While there have been some bullish signals from changes in U.S. inventory data, inventory levels around the world are still at record highs — both on and offshore," Johannes Benigni, managing director of JBC Energy in Vienna, said in a market report.

"It is hard to imagine oil market fundamentals being much weaker than they are at the moment," Benigni added. "We therefore expect that oil prices will decline again in the coming weeks."

The two-week surge in the oil price has raised the specter that a jump in energy costs would fuel inflation and lead policymakers to ease stimulus spending and raise interest rates, undermining a nascent global economic recovery.

"It's definitely a potential threat," said David Cohen, director of Asian economic forecasting for consultancy Action Economics. "Everybody gets a little nervous when the oil price starts bouncing higher."

U.S. Energy Secretary Steven Chu said earlier this week that crude prices at $80 per barrel are worrisome.

Stock markets, which have soared since March, could see gains reversed if oil and other commodities continue to rally, Cohen said.

"The recovery is not so fragile that it can't tolerate another dollar or two in the oil price," Cohen said. "But when people start getting worried about inflation, that could be a drag on markets."

In other Nymex trading, heating oil fell 1.13 cents to $2.0940 a gallon. Gasoline for November delivery dropped 2.89 cents to $2.0254 a gallon. Natural gas for November delivery gained 3.9 cents to $5.139 per 1,000 cubic feet.

In London, Brent crude for December delivery fell 99 cents to $79.00 on the ICE Futures exchange.

Associated Press writer Alex Kennedy in Singapore contributed to this report.