* Prices retreat further from 18-month highs
* Levels could hold below $85; back in range
* Crude down despite dollar weaker, equities' gain
* Coming up: Weekly U.S. Commitment of Traders report
(Recasts; dateline from LONDON)
By Gene Ramos
NEW YORK, April 9 (Reuters) - Oil prices fell below $85 a
barrel on Friday, retreating further from 18-month highs, as
bloated inventories stoked concerns about weak demand and
technical signals sparked a selloff.
The downturn erased early gains fueled by economic optimism
and a weaker dollar.
The stark effects of weak fundamentals in the United
States, the world's largest oil consumer -- where crude
inventories have risen for the past 10 weeks -- overrode
guidance from financial markets, analysts said.
Front-month U.S. crude <CLc1> fell 93 cents to $84.46 a
barrel by 1:40 p.m. EDT (1740 GMT), after earlier hitting a
session high of $86.37. In London, ICE Brent crude <LCOc1> was
50 cents lower at $84.31, after climbing more than $1 to $85.94
earlier in the session.
"Fundamentals are forcing crude to disconnect from
financials," said Jim Ritterbusch, president of Ritterbusch &
Associates in Galena, Illinois.
For the moment, the dollar is weaker against the euro while
Wall Street rose on hopes that aid could finally be cobbled up
for beleaguered Greece. [] []
The euro rose against the dollar as deputy finance
ministers and central bankers in the euro zone decided that any
emergency loans to Greece would be made on terms almost
identical to standard International Monetary Fund bailouts, if
Athens needed them. []
That eased earlier worries as Fitch Ratings cut Greece's
credit ratings by two notches and signaled further downgrades
are possible, citing intensifying fiscal challenges in the
debt-ridden country. []
Usually, a dip in the dollar makes commodities more
attractive to investors seeking less risky assets.
Early in the week, oil prices broke above the $65 to $85
range, where they have traded since August, to touch an
18-month high of $87.09 on Tuesday.
But government data on Wednesday put the breaks on the
six-day rally as U.S. crude inventories reached their highest
level in almost 10 months, an indication supply is still
outpacing demand. []
"The past week's rally moved to a point where it's gotten
ahead of itself," said Tom Pawlicki, an analyst at MF Global
Research in Chicago.
Other analysts attributed Friday's drop to a technical
reversal.
"The drop is being mostly fueled by technical selling after
a top at around $87. We are currently likely to come back to
the recent range between $80 and $83," said Eugen Weinberg,
head of Commodities Research at Commerzbank in Frankfurt.
Looking ahead, traders were expected to keep a close eye on
the yuan-dollar relationship. China, the world's second-largest
oil consumer, has pegged the yuan near 6.83 per dollar since
mid-2008 to help its exporters weather the global crisis.
But this has drawn increasing complaints from Washington
that the yuan is seriously undervalued, handing Chinese firms
an unfair trading advantage and effectively exporting
unemployment.
Some think a revaluation would boost China's oil demand in
the short term as it will make dollar-denominated crude cheaper
for Chinese buyers.
(Additional reporting by Robert Gibbons in New York, Emma
Farge in New York and Alejandro Barbajosa in Singapore; Editing
by Walter Bagley)
