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Oil inches down, European debt concerns weigh

business Updated: Nov 25, 2010 16:10 IST

Oil edged lower on Thursday on persisting concerns about European debt, with trading flat ahead of a US holiday and giving up some of the more-than-3-percent gains made a day earlier on strong US economic data.

A surprise crude inventory gain in top consumer the United States last week also pressured prices, with US crude for January down 20 cents at $83.66 a barrel by 0935 GMT, after rising $2.61 or 3.2 per cent on Wednesday, the biggest single-session per centage gain in four months.

ICE Brent declined 19 cents to $85.65. "It's basically flat from yesterday's close. With Thanksgiving today, whenever you've a public holiday in the US, people typically wait for NYMEX to reopen for direction," BNP Paribas' senior oil market analyst Harry Tchilinguirian said.

Trading volumes are set to be subdued as the New York Mercantile Exchange (NYMEX) combines trades for Nov. 25 and November 26 into one single trading session because of Thursday's Thanksgiving holiday.

"It's a short week and with the US closed, I don't see much direction away from yesterday's close," Tchilinguirian said, adding that euro zone debt developments together with China's inflation prospects will be the main two drivers behind risk-appetite.

In the absence of any major economic indicators, market focus lingered on Ireland's debt woes after Dublin announced a 15 billion euro belt-tightening plan, but failed to quell fears other euro zone members will run into debt difficulties.

Debt worries kept the euro close to a two-month low, while the dollar index, a measure of its performance against six other major currencies, inched up 0.3 per cent by 0934 GMT.

Oil tumbled to 2010 lows under $65 in May as the Greek debt crisis dampened confidence about the global economic recovery, and rebounded to a two-year high of $88.63 on November 11.

Earlier this week, prices dropped to near $80 after North Korea's deadly artillery barrage against a South Korean island that boosted the value of the dollar and reduced the appetite for riskier commodity assets.

US data supports

Initial jobless benefits claims in the US fell to their lowest level in more than two years last week while consumer spending rose for a fourth straight month in October, reports showed on Wednesday, fuelling hopes the economic recovery is strengthening.

US crude oil stockpiles rose 1.03 million barrels in the week to Nov. 19 as crude imports jumped by more than a million barrels per day, the US Energy Information Administration said on Wednesday.