* Dollar recovers against euro, pressures oil
* French oil port strike enters 11th day
* U.S. jobless claims fell in latest week
* Coming up: U.S. non-farm payrolls data, Friday
(Updates prices, adds analyst comment)
By Gene Ramos
NEW YORK, Oct 7 (Reuters) - Oil prices fell nearly 2
percent on Thursday in a pullback from five-month highs above
$84 as a recovery by the dollar prompted commodities investors
to book profits ahead of a crucial U.S. jobs report.
Weaker U.S. equities, a gauge of future energy demand, also
weighed on oil.
U.S. crude for November delivery <CLc1> settled $1.56
lower, or 1.87 percent, at $81.67 a barrel, after hitting a
session peak of $84.43, its highest since May 4.
ICE Brent <LCOc1> in London ended down $1.63, or 1.92
percent, to $83.43 a barrel, having hit $86.02, also the
highest since May 4.
"Crude futures prices are coming back down to earth in a
delayed reaction to the bearish government report of a large
build in crude inventories last week," Phil Flynn, analyst at
PFGBest Research in Chicago, said.
"Oil investors have also turned cautious and are booking
profits ahead of Friday's key employment data, should the
report turn out to be bearish," Flynn said.
September U.S. nonfarm payroll numbers are due on Friday
morning, with analysts polled by Reuters forecasting an
unchanged level after employers shed 54,000 jobs in August.
There is a risk that employment declined after an
independent report on Wednesday showed private employers
unexpectedly cut jobs by 39,000 in September. []
Oil rose earlier as the dollar weakened against the euro on
prospects that the U.S. Federal Reserve would launch a new
round of monetary easing to jump-start a sluggish economy.
But the euro surrendered gains as investors said the
European single currency had risen too far, too fast. [].
A cheaper dollar usually boosts crude because it makes
dollar-denominated oil less expensive for consumers using other
currencies and reduces the value of dollars paid to producers.
"As far as the oil complex is concerned, we are viewing
today's sharp decline as corrective and a natural reaction to a
dramatic one-week price up-spike that simply became
overcooked," said Jim Ritterbusch, president of Ritterbusch &
Associates in Galena, Illinois.
Data showing new U.S. claims for unemployment benefits fell
to a near three-month low last week did not alter the view that
the Fed would soon launch a new asset-purchasing program.
[]
RALLY ENDING?
The oil rally may be close to running its course for now,
according to some technical indicators. U.S. crude's relative
strength index (RSI) is at 72, in overbought territory, which
can indicate a pullback is coming.
"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," MF Global analyst Edward Meir said in a report.
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Graphic on U.S. crude and its RSI:
http://graphics.thomsonreuters.com/gfx1/TRTrain_20100710125257.jpg
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Meanwhile, operations at the key French oil port of Fos
Lavera, which serves eight refineries in France, Switzerland
and Germany, remained suspended as a strike went into its 11th
day. []
The dispute has blocked oil tankers, forced some refineries
to reduce operations and driven up fuel prices in Europe --
supporting the wider oil market.
Cash gasoline at New York Harbor has risen on concerns that
the strike could affect imports of European gasoline, which
makes up a sizable portion of northeastern U.S. supplies.
Oil prices rose on Wednesday after a U.S. government report
showed inventories of gasoline and distillates fell more than
expected in the world's top consumer. Crude stockpiles rose
much higher than forecast. []
(Additional reporting by Robert Gibbons in New York, Alex
Lawler in London; Alejandro Barbajosa in Singapore; Graphic by
David Turner; Editing by Marguerita Choy)
