(Recasts, adds quote, fighting in Basra)
By Maryelle Demongeot
LONDON, March 25 (Reuters) - Oil bounced back from an
earlier dip below $100 a barrel as the dollar weakened on
Tuesday, ending a four day-retreat that has knocked a tenth off
prices since last week.
U.S. light crude for May delivery <CLc1> stood 60 cents
higher at $101.46 a barrel by 1215 GMT, up from an earlier low
of $99.66, but sharply down from a record high $111.80 a barrel
touched on March 17.
London Brent crude <LCOc1> was up 95 cents to 100.81 a
barrel, recovering from an earlier $98.70 low.
"We remain on a trading pattern closely tied to the dollar.
The dollar has starting falling again, and other commodities
were well supported yesterday, so people are now doing some
short-covering," said Olivier Jakob at Petromatrix.
The dollar fell on Tuesday, snapping four days of gains,
with persistent nerves on U.S. economic health dominating
sentiment. []
Gold <XAU=> rebounded, too, after the dollar resumed its
downward trend, [], while industrial metals rose as much
as 3 percent, lifted by rises on stock markets as some
confidence returned to the economy.[]
A recovery in the dollar from recent lows against the euro
ahead of the Easter break had helped pushed oil prices down late
last week and on Monday, as it pressured its nominal price.
U.S. ECONOMY
But underlying concerns about U.S. demand remained.
"The question is how bad the U.S. economy is going to be. So
the tendency for the time being is to back off after people took
profit from last week's highs," Tony Nunan, risk management
executive at Tokyo-based Mitsubishi, said.
Oil has dropped more than $10 from last week's record as
investors fled commodities on a view that gains had been
overdone.
A slowdown in the U.S. economy, combined with a seasonal
fall in demand in the second quarter, may drive oil prices below
the $100 mark for the coming weeks, analysts said.
"There is a realisation in the market that the fundamentals
really don't justify prices to be so far above $100," said
Gerard Burg, a resource analyst at the National Australia Bank.
"One of the key factors is the recent build-up in U.S.
stockpiles and the stocks are looking pretty healthy at this
stage," he added.
Analysts expect a third rise in a row in weekly U.S. crude
oil stocks, seen up 700,000 barrels in the week to March 21,
according to a preliminary Reuters poll ahead of Wednesday's
government data.
The nine analysts polled also expected a more bullish 1.6
million barrels fall in distillates stocks and a 900,000-barrel
fall in gasoline inventories.
In Iraq security forces launched a major operation in the
southern oil city Basra to bring it under government control.
Iraqi oil sources said Basra's oilfields, which exported
1.54 million barrels per day in February, were operating
normally on Tuesday. [].
(Additional reporting by Fayen Wong in Sydney)
