* Fall in U.S. equities drags price lower
* Prices stuck in narrow $7 range
* Warm U.S. weather; high stocks set ceiling
(Adds U.S. stocks, updates prices)
By Emma Farge
LONDON, Nov 19 (Reuters) - U.S. crude futures fell more than
$1 towards $78 a barrel on Thursday as gains in the dollar
weighed on prices and doubts about the pace of demand recovery
in the United States dampened sentiment.
The dollar inched higher against the euro to move up from
15-month lows earlier in the week while sluggish demand for
distillates due to mild weather in the United States also
steered prices lower. []
Oil extended losses after a 2 percent drop in U.S. stocks,
signalling to the market that the expected recovery in fuel
demand in the world's largest consumer could falter. []
U.S. crude prices for December delivery <CLc1> fell $1.43 to
$78.15 a barrel by 1503 GMT, after settling up 44 cents on
Wednesday.
Brent crude <LCOc1> for January delivery fell $1.20 to
$79.27 a barrel after trading on Wednesday within cents of the
year high of $80.26 reached in October.
"We have seen some good gains in the last few days and we
are very close to important psychological levels so it's a
slight retracement," said oil futures broker Tony Machacek at
Bache Financial.
U.S. oil prices rose above the key $80 a barrel level in the
previous session after government data showed a drop in both
crude and product inventories in the world's largest oil
consumer. []
Crude stocks fell a more-than-expected 900,000 barrels and
while distillate stocks including diesel and heating oil fell
300,000 barrels this was less than analyst projections.
FLOATING STOCKS
But analysts said mild weather in the United States and high
global oil products stocks held in storage on land and on
floating vessels was set to limit potential upside in oil.
Floating stocks of oil products, mostly distillates, are set
to rise to over 97 million barrels by the end of the year,
according to Reuters estimates. []
"Temperatures are unseasonably mild in the United States and
crude is holding the range between the high $70s and low $80s,"
said Peter McGuire, managing director of CWA Global Markets.
On the supply side, the Organization of the Petroleum
Exporting Countries should hold oil output steady when it meets
in December as current prices do not suggest the need to change
supply, the head of Libya's National Oil Corporation said on
Wednesday. []
Oil prices have rallied from lows of around $33 a barrel
last December as investors have used liquidity pumped out by
central banks to take bets on the pace of fuel demand recovery
and gains in the oil market.
A depreciating dollar has also lured investors who are
looking to use tangible assets such as oil as a hedge.
"Oil is very close to other assets and moves will depend on
the dollar," said Machacek.
Since hitting a high of $82 a barrel in October, U.S. prices
have traded in a narrow $7 band.
Implied oil volatility is the lowest since February 2008,
back near levels before last year's surge to a record high.
<CLATMIV>
For a graphic showing oil prices and implied volatility,
click:
http://graphics.thomsonreuters.com/119/CMD_OLVLTY1109.gif
The market shrugged off news that the number of additional
U.S. workers claiming unemployment benefits was unchanged at
505,000 in the week ending Nov. 14. []
(Additional reporting by Nick Trevethan in Singapore;
editing by Keiron Henderson and Sue Thomas)
