Oil fell by more than $1 to below $77 a barrel on the New York Mercantile Exchange for the first time this year, despite declining U.S. inventories and refinery activity, and amid strength in the U.S. dollar and falling stock markets. The U.S. Energy Department reported Thursday that crude inventories fell by 400,000 barrels to 330.6 million barrels last week. Analysts had expected oil supplies to rise. The department's Energy Information Administration (EIA) also reported that inventories of distillates (including heating oil, diesel, and jet fuel) fell by 3.3 million barrels to 157.1 million barrels. Supplies of gasoline rose by 3.9 million barrels to 227.4 million barrels. Inventories of natural gas declined. Weak energy demand during the fragile economic recovery has seen U.S. refiners rapidly reduce activity to try to help profit margins. Refinery activity fell nearly 3 percent last week to just 78.4 percent of capacity. The U.S. dollar's jump to a five-month high against the euro also pressured commodities on Thursday. Dollar-denominated commodities tend to fall as the U.S. currency rises as they become more expensive for holders of other currencies. A second consecutive slide in stock markets (sparked by President Barack Obama's proposals to limit banks) also pressured oil prices, as did concerns that China, now a top oil consumer, will take further steps to keep its economy from overheating after it posted growth above 10 percent for the first time since 2008. Beijing, worried about inflation, ordered banks to reduce lending after a record surge in 2009. U.S. crude prices hit a 15-month high near $84 a barrel on January 11. Prices are now 47 percent below their July 2008 record high above $147, but have more than doubled from lows near $32 hit by the end of 2008.
