Oil falls from 10-month high as dollar strength halts rally

Crude oil has surged about 90% from a 12-year low in February, amid unexpected disruptions and a slide in US output

Crude oil declined from a 10-month high in New York, as a stronger dollar countered a rally driven by tightening global supplies.

Futures fell as much as two per cent, as global equities retreated and the US currency strengthened against its peers, making commodities less attractive as an investment. Crude oil settled on Wednesday at the highest since July 15 after the US government said stockpiles dropped by 3.23 million barrels last week to a two-month low.

"There's a financial angle to today's retreat," said Tim Evans, an energy analyst at Citi Futures Perspective in New York. "There's some light profit-taking after the run up in prices and the decline is prompted at least in part by the recovery of the dollar."

Crude oil has surged about 90 per cent from a 12-year low in February, amid unexpected disruptions and a slide in US output, which is under pressure from the Organization of Petroleum Exporting Countries' policy of pumping without limits. Militant attacks have hobbled production in Nigeria, while oil companies in Canada earlier suspended operations at facilities threatened by wildfires.

West Texas Intermediate (WTI) for July delivery dropped 70 cents, or 1.4 percent, to $50.5 a barrel at 1:24 pm on the New York Mercantile Exchange. Futures rose 1.7 per cent to settle at $51.2 on Wednesday. Total volume traded was about five per cent below the 100-day average.

Brent for August settlement fell 58 cents, or 1.1 per cent, to $51.9 a barrel on the London-based ICE Futures Europe exchange. Brent climbed 2.1 per cent to $52.51 Wednesday, the highest close since October 9. The global benchmark oil traded at a 73-cent premium to WTI for August delivery.

The MSCI All-Country World Index, a gauge of stocks around the world, dropped from a six-month high. The Bloomberg Dollar Index, which tracks the value of the dollar against the currencies of 10 trading partners, rose for the first time in three days. The Bloomberg Commodity Index was set to end the longest run of gains since March. Germany's 10-year bond yields traded near a record-low as investors look for a safe haven.