* Dollar weaker, but pares earlier decline
* French oil port strike enters 11th day
* U.S. jobless claims fell in latest week
(Recasts, updates prices)
By Alex Lawler
LONDON, Oct 7 (Reuters) - Oil slipped from a five-month high
above $84 a barrel on Thursday on concerns that a rally driven
by a weakening dollar had run ahead of the market's fundamentals
of supply and demand.
A falling U.S. dollar, linked to an expected inflow of fresh
dollars into the economy, has spurred money flows into oil and
other commodities. Oil reversed course as the dollar pared its
losses and equities slipped. [] []
"It highlights the nervousness in the market about
underlying fundamentals and worry the rally may be getting ahead
of them," said Gene McGillian, an analyst at Tradition Energy in
Stamford, Connecticut.
U.S. crude <CLc1> for November fell 40 cents to $82.83 by
1431 GMT, after trading as high as $84.43, the highest intraday
price for a nearby contract since May 4. ICE Brent <LCOc1>
slipped 50 cents to $84.56.
"The market is very nervous and there was some
profit-taking," said Christopher Bellew, an oil broker at Bache
Commodities in London.
A French oil port strike that has disrupted supplies limited
the decline. Talks between strikers at the Fos Lavera port and
management were in deadlock, the port said as the strike entered
its 11th day. []
The dispute has blocked oil tankers, forced some oil
refineries to reduce operations and driven up fuel prices in
Europe -- supporting the wider oil market.
"It will have a very strong impact on the supply of oil
products," said Christophe Barret, an oil analyst at Credit
Agricole. "I think it is one of the main factors supporting
product and crude oil prices."
QE2
The prospect of a second round of U.S. quantitative easing,
known as QE2, hangs in part on U.S. employment reports. Closely
watched monthly data are due on Friday.
In a precursor of the monthly jobs figures, ADP's national
employment report on Wednesday said private employers in the
U.S. cut 39,000 jobs in September, versus expectations for an
increase. []
New U.S. claims for unemployment benefits unexpectedly fell
last week, touching their lowest level in nearly three months,
according to a government report on Thursday. []
The rally in oil prices may be close to running its course
for now, according to some technical indicators. U.S. crude's
relative strength index (RSI), at 72, is in overbought
territory, which can indicate a pullback is coming.
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For a related graphic on U.S. crude and its RSI:
http://graphics.thomsonreuters.com/gfx1/TRTrain_20100710125257.jpg
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"No doubt, many sectors are overbought, and so the upside
response is looking more sluggish, but we think the more likely
variable has to do with nervousness ahead of the non-farm
payroll number out on Friday," MF Global commodities analyst
Edward Meir said in a report.
Oil prices had gained some support from a U.S. government
report on Wednesday that showed inventories of gasoline and
distillates fell more than expected in the world's top consumer.
[]
Even so, U.S. fuel inventories hit a record high earlier in
September and are near a record high in the economies of the
Organisation for Economic Co-operation and Development.
(Additional reporting by Alejandro Barbajosa and Robert
Gibbons, graphic by David Turner, Editing by Sue Thomas and Jane
Baird)
