* Oil weakens after overnight surge as dollar recovers
* Weak U.S. economic data casts doubt on pace of recovery
* U.S. crude oil build weighs on sentiment
(Updates throughout, changes dateline, pvs SINGAPORE)
By Christopher Johnson
LONDON, Feb 25 (Reuters) - Oil fell below $80 on Thursday,
dragged lower by a rise in the dollar as the euro slid on
concerns over the outlook for the European economy, while a rise
in U.S. crude oil stocks also dampened sentiment.
The euro fell to a one-year low against the yen and was down
versus the dollar on uncertainty over the ability of the Greek
government to cope with its fiscal crisis, while the dollar's
trade-weighted index rebounded. []
A firmer dollar makes oil and other commodities more
expensive for holders of other currencies, and also dragged gold
down to near a two-week low. <GOL/>
U.S. crude futures for April <CLc1> were down 42 cents at
$79.58 a barrel by 0904 GMT, after rising $1 on Wednesday,
lifted by comments from U.S. Federal Reserve Chairman Ben
Bernanke, who stressed his commitment to low interest rates.
London Brent crude <LCOc1> lost 33 cents to $77.76 a barrel.
"The dollar had put pressure on commodities prices across
the board," said Carsten Fritsch, analyst at Commerzbank. "It is
encouraging profit-taking after recent price gains, which
clearly don't seem to be justified by fundamentals."
Oil prices have risen by around $10 per barrel since hitting
a low below $70 in the first week of February and are now close
to the top of their trading range over the last year.
"PREDOMINANT GUIDING FORCE"
Edward Meir, analyst at brokers MF Global, said he saw the
direction of the dollar as "the predominant guiding force" in
the oil market.
"We suspect that the dollar still has more room to run on
the upside ... and as a result, should keep the downward
pressure on commodities for a little while longer," Meir said.
U.S. data this week has dampened expectations of a quick
rebound from the deep economic slowdown of the last two years.
Sales of new U.S. homes unexpectedly fell to a record low in
January while demand for loans to buy homes hit a 13-year low
last week, fanning fears of renewed weakness in the housing
market and raising doubts over the pace of the economic
recovery. []
In Europe, Portugal's Socialist government, under investor
pressure to cut spending and ensure it will not be the next weak
link in the euro zone after Greece, has frozen civil service
salaries this year as part of its plan to reduce its ballooning
fiscal gap. []
These countered the initial uptrend, after Bernanke said on
Wednesday interest rates would stay low in view of a weak job
market and low inflation.
Bernanke's testimony on Wednesday to Congress had earlier
calmed investors' concerns over interest rates after the Fed
said last week that discount rates will be raised to 0.75
percent from 0.5 percent, triggering an immediate rise in the
dollar.
U.S. crude oil stockpiles rose by 3 million barrels to 337.5
million barrels in week ended Feb. 19, data from the Energy
Information Agency showed on Wednesday. But U.S. gasoline
inventories fell 900,000 barrels to 231.2 million barrels,
versus analysts estimates of a 400,000-barrel build. []
U.S. refiners normally start stockpiling in April for the
start of the driving season at the end of May and peaks in
June-July.
China continued to show healthy demand for oil, importing
17.1 million tonnes of crude in January, up nearly 33.4 percent
from a year ago, official data showed.
(Additional reporting by Seng Li Peng in Singapore; editing by
Sue Thomas)
