* Dollar firms and stocks fall on economic recovery doubts
* OPEC considers raising production in December
* Britain's Q3 GDP contraction bodes badly for fuel demand
(Updates prices and details.)
By Joshua Schneyer
NEW YORK, Oct 23 (Reuters) - Oil prices fell on Friday as a
stronger U.S. dollar and doubts over the pace of economic
recovery halted the commodity's recent rally.
The dollar <.DXY> gained against a basket of other
currencies, while the S&P stock index <.SPX> fell more than 1
percent, as weak industrial sector earnings made investors
question the pace of an economic recovery.
"Oil is holding around $80 but the decline in equities
markets and a stronger dollar mean the rally in oil prices has
been stalled for now," said Gene McGillian, analyst at
Tradition Energy in Stamford, Connecticut.
U.S. crude <CLc1> for December delivery settled down 69
cents a barrel at $80.50, while Brent crude <LCOc1> dropped 86
cents to $78.65 a barrel by 2:47 p.m. EDT (1847 GMT).
Oil prices had risen to a one-year high of $82 earlier this
week, after rallying more than 10 percent in a week. The
surging prices coincided with a rise in global stock indices
and a weak dollar, which plunged to a 14-month low against a
basket of currencies this week. []
Oil, priced in dollars, remains cheap for holders of
foreign currencies and has been moving in an inverse price
relation against the dollar.
Optimism for an economic recovery spurs investment in
traditionally riskier assets like oil and stocks. That has
helped crude prices rise even though oil inventories remain
well above average levels. []
"The 'traditional fundamentals' are improving, but only
slowly," according to a Friday research note from Deutsche Bank
global oil economist Adam Sieminski.
Disappointing third-quarter earnings from industrial
companies such as oil field services giant Schlumberger <SLB.N>
and chip-maker Broadcom Corp <BRCM.O> triggered uncertainty
about the pace of economic recovery, sending U.S. stocks lower.
The dollar firmed against sterling after data on Friday
showed Britain's economy unexpectedly shrank by 0.4 percent in
the third quarter, roiling economist expectations for a return
to growth from the worst recession in decades. []
That followed bearish U.S. economic data on Thursday, which
showed a larger-than expected rise in workers filing new claims
for jobless aid last week. []
In addition, OPEC Secretary General Abdullah al-Badri said
on Thursday the group, which pumps a third of the world's oil,
could consider raising production when it meets in December.
[]
Al-Badri, who earlier this week called $80 oil "a bit
high," said OPEC would only consider raising production levels
if oil inventories shrank and there was "real economic growth."
As OPEC considers pumping more crude, analysts said it's
uncertain whether global fuel demand is increasing enough to
warrant more production.
"OPEC may want to calm the market with more crude, but it's
not clear that refiners have an appetite to take it," Deutsche
Bank's Sieminski wrote in a note.
For related graphic on the dollar and oil price
co-relation, please click here
http://graphics.thomsonreuters.com/109/CMD_OILCUR1009.gif
(Reporting by Joshua Schneyer; Additional reporting by
Barbara Lewis and Jane Grieve in London, and Nick Trevethan in
Singapore; Editing by Marguerita Choy and Lisa Shumaker)
