* U.S. crude inventories at 10-month high - EIA
* Euro trades close to this year's lows against dollar
* Coming Up: U.S. jobless claims; 1230 GMT
(Updates prices)
By Alejandro Barbajosa
SINGAPORE, April 8 (Reuters) - Oil declined for a second
day on Thursday to trade below $86 as a stronger dollar and
soaring U.S. crude stockpiles took the steam out of the year's
sharpest rally.
Resurgent concern about Greece's fiscal crisis has shaken
markets from commodities to equities over the past two days,
boosting the value of the dollar against the euro and other
major currencies as investors seek safer assets.
Front-month U.S. crude <CLc1> rallied to an 18-month
intraday peak above $87 on Tuesday after a flurry of positive
economic indicators from the world's largest energy user.
The contract climbed almost 9 percent in six sessions,
before changing direction on Wednesday. Prices on Thursday fell
29 cents to $85.59 a barrel by 0655 GMT, while London ICE Brent
<LCOc1> slid 34 cents to $85.25, pulled lower by the tenth
consecutive weekly gain in U.S. crude supplies.
"The market had a very strong run over the last few days
and it's just taking a little bit of a breather because the
U.S. dollar went up, equity markets came down and so did
crude," said Peter McGuire, managing director of Commodity
Warrants Australia in Sydney.
"Then the inventory numbers came out and it was a bit of a
wake-up call," he said.
"The worries about sovereign debt in Europe are not going
away."
The dollar climbed more than 0.3 percent against a basket
of currencies on Thursday, while the euro was close to this
year's low against the U.S. currency. []
Two top U.S. Federal Reserve officials warned about the
risks to the economy from asset bubbles on Wednesday, and one
suggested raising interest rates to halt risky behaviour that
could trigger another bust. []
DRIVING SEASON AHEAD
U.S. crude stocks rose last week to their highest level in
nearly 10 months as imports surged, offsetting higher demand by
refiners that are ramping up operations, the country's Energy
Information Administration (EIA) said on Wednesday. []
Commercial stockpiles rose 2 million barrels to 356.2
million barrels in the week to April 2, the EIA said, while
inventories of distillate fuel, comprising heating oil and
diesel, unexpectedly increased, ending a series of drops.
But gasoline supplies fell more than expected, supporting
May RBOB futures on the New York Mercantile Exchange close to
their highest level since October 2008 at 231.50 cents a
gallon. RBOB is one of the main components of gasoline.
Oil prices may keep rising in the coming weeks as fuel
demand increases in the U.S. with the approach of the driving
season from late May to early September, McGuire said.
"We wouldn't be surprised to be close to $100 this summer,"
he said.
(Editing by Michael Urquhart)
