* Dollar rallies; reverses early gains
* IEA monthly report sees 2010 demand acceleration
* High U.S. stocks and contango in focus
(Updates prices, recasts, adds detail, changes dateline from
previous LONDON)
By Edward McAllister
NEW YORK, Dec 11 (Reuters) - Oil fell for the eighth
consecutive session on Friday, edging below $70 a barrel as a
stronger dollar pressured prices, outweighing higher global
demand growth forecasts and strong Chinese industrial output.
U.S. crude for January delivery <CLc1> fell 64 cents to
$69.90 a barrel by 12:16 EST (1716 GMT). Over the past seven
trading days, front month crude has sunk almost $7, or 10
percent.
Brent crude futures <LC0c1> fell 21 cents to $71.65 a
barrel.
The U.S. dollar rallied on Friday, boosted by
higher-than-expected U.S. retail sales in November. []
[] A stronger dollar tends to pressure oil prices
as it makes crude more expensive for holders of other
currencies.
"The dollar's strength is overwhelming other inputs. Energy
prices seemed to benefit the most from the dollar's weakness
all year, and now it's payback time," said John Kilduff,
partner at Round Earth Capital in New York.
This quarter, some investors have been shifting money out
of the sinking dollar and into tangible assets such as oil and
gold, and this helped to support oil in a band between $75 and
$82 a barrel in October and November.
But prices broke below this range earlier this week,
leaving a more uncertain outlook for crude.
U.S. equities pared gains on Friday, pressured by strength
in the U.S. dollar, while declines in shares of large cap
technology companies dragged the Nasdaq into negative
territory. []
Investors have looked to wider economic data this year for
signs of economic recovery and a potential rebound in energy
demand.
Earlier, a forecast from the International Energy Agency
(IEA) showed that world oil demand will rise by almost 1.5
million barrels per day (bpd) in 2010 to 86.3 million bpd and
the rate of demand growth will also accelerate.
[]
The report came after the U.S. Energy Information
Administration revised down its own world oil demand forecast
for 2010 on Tuesday [].
Strong industrial growth figures out of China had earlier
supported prices.
China's November industrial output surged to its strongest
since June 2007, underscoring the economy's robust recovery
from the global downturn, and analysts expected the trend to
continue in coming months. []
OVERSUPPLY
For now, analysts are citing $70 a barrel as a key support
level but say oversupply could push prices lower in the medium
term.
Earlier this week, the EIA reported stocks at the U.S.
delivery hub of Cushing in Oklahoma rose 2.5 million barrels to
33.4 million barrels. []
This inventory overhang has depressed front month U.S.
crude prices relative to oil futures, resulting this week in
the widest WTI crude market contango since August of more than
$2 a barrel.
For graphic showing steepening of the forward curve, see:
http://graphics.thomsonreuters.com/129/CMD_NYOIL1209.gif
"There is a strong message in the oil market and that is
weakness. The contango is widening significantly and this
points to physical oversupply," said analyst David Wech at JBC
Energy, referring to both inventories on land and in floating
storage.
Distillate and gasoline stocks rose last week, despite cold
weather, as supply remained ample versus demand.
The volume of refined oil products stored on ships floating
in the sea increased to 98 million barrels at the end of
November, the IEA said on Friday. []
(Additional reporting by Robert Gibbons and Gene Ramos in New
York and Emma Farge in London; Editing by Christian Wiessner)
