UPDATE 4-Oil falls to near $72 as dollar rises

                                
 *Rising dollar halts two-day rally
                                
 * Market eyes colder weather forecasts in eastern U.S.
                                
 * U.S. crude and distillate stocks post large draws
                                
 
                                
 (Updates prices, adds U.S. data)
                                
 By Emma Farge
                                
 LONDON, Dec 17 (Reuters) - Oil fell to around $72 a barrel
on Thursday as the dollar rose to a more than three-month high
against the euro, outweighing a surprise drop in U.S. distillate
stocks ahead of an expected cold snap.
                                
 The U.S. Federal Reserve on Wednesday left interest rates
unchanged as expected but its optimistic comments on the economy
fuelled a dollar rebound. [USD/] [ID:nN16119711]
                                
 Oil prices tend to fall when the dollar rises because it
makes it more expensive for buyers holding other currencies.
                                
 "The big story is the dollar/euro figure which has pulled
down other commodities with it," said oil trader Rob Montefusco
of Sucden Financial, adding that bearish sentiment was tempered
by forecasts for cold weather in the eastern United States.
                                
 U.S. crude for January delivery <CLc1> fell 39 cents to
$72.27 a barrel by 1502 GMT after falling more than $1 earlier.
ICE Brent futures <LCOc1> shed 86 cents to $73.43 a barrel.
                                
 Analysts scoured data out of the world's top fuel consumer
the United States for clues about the pace of economic recovery
but signals were mixed.
                                
 U.S. jobless claims rose unexpectedly last week while
November leading indicators rose 0.9 percent. [ID:nN17160953]
[ID:nWEQ003678]
                                
 Earlier this week, oil prices closed below the
psychologically important $70 a barrel after falling nearly $10
over nine sessions but prices recovered later this week.
                                
 The rebound was prompted by declining U.S. crude inventories
which fell by 3.7 million barrels compared with an expected drop
of 1.8 million barrels, data from the Energy Information
Administration showed.
                                
 Distillate stocks which include diesel and heating fell by
2.9 million barrels, far exceeding forecasts for a 600,000
barrel drop. [EIA/S]
                                
 A further drawdown in distillate stockpiles could be on the
cards, after a 10-day National Weather Service forecast this
week called for unseasonably cold weather in most of the eastern
United States, the world's biggest regional consumer of heating
oil.
                                
 "If demand starts coming through we could have some little
spikes. When you have to crank up refinery runs you should see
more crude draws and the distillate overhang coming down," said
Montefusco.
                                
 (Click on the link for a graphic showing the relationship
between U.S. crude stocks and the oil price
http://graphics.thomsonreuters.com/129/OIL_CSTKPL1209.gif)
                                
 On the supply front, the Organization of the Petroleum
Exporting Countries (OPEC), which pumps around one in three
barrels of crude consumed around the world, meets in Angola to
discuss production policy on Dec. 22 and is widely expected to
keep output unchanged. For a Reuters poll click [ID:nLDE5BG1O4]
                                
 Oil prices are now more than double the low of $32.40 a
barrel touched in December 2008.
 (Additional reporting by Jennifer Tan; editing by Keiron
Henderson)