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Brent drops toward $61 as dollar firms after strong US data

US crude fell 53 cents to $56.59, after settling $1.86 higher in the previous session, hurt by industry data that showed a surprise build in domestic crude stocks.

Photo: Reuters Photo: Reuters

Brent futures fell towards $61 per barrel on Wednesday, giving up some of the previous session's gains, as the US dollar held near its highest level in nearly nine years on strong data.

The dollar index stayed close to its highest since April 2006 after a revised third-quarter US gross domestic product report blew past expectations to register the fastest pace of growth in 11 years.

A strong dollar makes commodities priced in the greenback expensive for holders of other currencies.

Brent for February delivery dropped 51 cents to $61.18 by 0601 GMT after settling up $1.58 on Tuesday.

US crude fell 53 cents to $56.59, after settling $1.86 higher in the previous session, hurt by industry data that showed a surprise build in domestic crude stocks.

"It's ironic. The US economy is starting to boom and crude oil prices are contracting in the opposite direction," said Ben Le Brun, market analyst at Sydney's OptionsXpress.

Oil prices have plunged almost 50 per cent since June.

"The very sharp drop in crude prices that we are currently observing is not sustainable. Over time, the loss in global liquids at Brent prices below $70 a barrel would cause non-OPEC (Organization of Petroleum Exporting Countries) growth to grind to a halt while global demand growth would be rejuvenated," US based Pira Energy said in a research note.

"We believe that industry will find ways to maintain profitability during the next several years of low prices via cost efficiency steps, productivity improvements and pressure on suppliers for both shale and other high cost supplies," it said.

Investors are now waiting for official US oil inventory data to be released by the US Department of Energy's Energy Information Administration (EIA) later on Wednesday.

American Petroleum Institute data showed US crude stocks rose by 5.4 million barrels in the week ended December 19, while analysts expected a drop of 2.3 million barrels.

"Very likely Brent and WTI will remain steady, trading at around current levels" in the absence of production cuts or geopolitical risks, Yusuke Seta, commodity sales manager at Tokyo's Newedge Japan, told Reuters.

(Reuters)