* Stronger dollar halts two-day rise in crude
* Market eyes colder weather forecasts in eastern U.S.
* U.S. crude and distillate stocks post large draws
(Updates prices)
By Emma Farge
LONDON, Dec 17 (Reuters) - Oil fell nearly 2 percent to $71
a barrel on Thursday as the dollar rose to a more than 3-1/2
month high against the euro, outweighing a surprise drop in
U.S. distillate stocks and overshadowing an expected cold
snap.
The U.S. Federal Reserve on Wednesday left interest rates
unchanged as expected but its optimistic comments on the
economy fueled a dollar rebound. [] []
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> traded down $1.34 to
$71.32 a barrel by 11:45 a.m. EST (1645 GMT). ICE Brent futures
<LCOc1> shed $1.83 to $72.46 a barrel.
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Relationship between U.S. crude stocks and the oil price:
http://link.reuters.com/dyd37g
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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. []
Earlier this week, oil prices closed below the
psychologically important benchmark of $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. []
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.
On the supply front, the Organization of the Petroleum
Exporting Countries (OPEC), which pumps about 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
[]
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 and Lisa Shumaker)
