* Strong dollar, weak stock markets pressure oil
* Building floating storage shields weak demand
* Valero to permanently shut Delaware City refinery
(Refiles to change headline to "over 1 pct." Adds detail
throughout, recasts, changes dateline from LONDON)
By Edward McAllister
NEW YORK, Nov 20 (Reuters) - Oil fell more than 1 percent
below $77 on Friday as a stronger dollar weighed on prices and
falling equities raised concern about the economy and the
outlook for energy demand.
U.S. crude for December delivery fell 82 cents to $76.64 a
barrel by 11:42 EST (1642 GMT), ahead of its expiration later
in the session. U.S. crude for January delivery was down 72
cents at $77.33.
London Brent crude slipped 63 cents to $77.01.
"Oil is clearly still tied to broader financial markets and
seeing losses due to a stronger dollar and a drop in stock
prices," said Gene McGillian, analyst at Tradition Energy in
Stamford, Connecticut.
Investors have scoured economic data in recent months for
signs of a recovery that might boost global energy demand.
U.S. stocks fell on Friday after worse-than-expected
quarterly results from computer maker Dell Inc and homebuilder
D.R. Horton Inc underscored that the road to recovery would not
be smooth. []
The dollar rose for a second straight session on Friday as
investors cut exposure to risky assets and high-yield
currencies ahead of a holiday-shortened week in the United
States. [] A stronger dollar makes dollar-denominated
commodities like oil more expensive for holders of other
currencies and tends to pressure crude prices.
Oil has traded mainly between $75 and $80 a barrel in
recent weeks as mixed economic signals failed to give a clear
outlook for crude.
"To rally, we'd need to see more significant signals of
economic activity perking up," McGillian added.
SWELLING INVENTORIES
Valero Energy Corp <VLO.N> said on Friday it will
permanently shut its Delaware City, Delaware, refinery because
of weak economic conditions, the latest sign that refiners in
the U.S. are struggling against weak fuel demand and thinning
margins. []
"If there's ever been a time to mothball a refinery, it's
probably now, with utilization rates below 80 percent. I
wouldn't be surprised to see additional closures," said Peter
Beutel, president at Cameron Hanover in New Canaan,
Connecticut.
A lack of demand for oil products has led to very high
inventory levels being stored at sea as well as on land.
Volumes in floating storage are estimated to be around 90
million barrels, more than total global daily oil consumption.
[]
Analysts say products being bought for floating storage,
often a financial strategy where the buyer is able to sell the
products on for a profit at a later date, has created the
illusion of improved demand.
"By the end of the winter there is likely to be as much
distillates afloat as in the total U.S. at the end of winter
2007 and we expect that it will be more and more difficult for
some of the Wall Street commodity banks to avoid mentioning the
subject and to continue to hide the floating storage fill-up as
'demand from emerging economies,'" said Olivier Jakob, oil
analyst at Petromatrix, in a research note on Friday.
(Additional reporting by Josh Schneyer, Robert Gibbons and
Gene Ramos in New York and Joe Brock in London; editing by Jim
Marshall)
