Oil fell sharply on Tuesday, retreating from a record high as a rebound in the dollar spurred selling and as fears over a rash of global supply disruptions began to recede. US crude futures settled down $3.12, or 2.6 percent, to $115.63 a barrel after dropping as low as $114.95. London Brent crude fell $3.31 at $113.43.
The losses bring US oil down from Monday's record of $119.93 a barrel - a peak hit on supply disruptions from Nigeria and the North Sea. "The dollar has got stronger and that has been offsetting the impact of these outages," noted Mike Wittner, head of oil market research at Societe Generale.
Oil prices have more than quintupled since 2002 as surging demand from China and other emerging economies outpaced new supplies. The dollar rose to its highest against the euro in nearly a month as expectations grew that the US Federal Reserve will soon signal the end of its interest rate easing campaign and turn its attention to inflation. A stronger dollar can weaken prices for commodities denominated in the currency by eroding non-dollar purchasing power and by leading investors to shift money out of the sector, analysts said.
Oil prices had hit the peak Monday near $120 a barrel as a strike at a Scottish oil refinery forced the shut-in of North Sea crude production and a strike and militant attacks in Nigeria cut another chunk of output. Workers at the Grangemouth refinery returned to work on Tuesday after the two-day strike, allowing BP to begin the restart of a major crude pipeline from the North Sea connected to the Grangemouth site.
Resumption of talks between Nigerian unions and Exxon Mobil to end a six-day strike that has shut in much of the US oil major's Nigerian output also helped oil's retreat. The strike and attacks by Niger Delta rebels have slashed oil production in the world's eighth-largest exporter by half.
Figures from the US Department of Energy (DOE) on Monday had also shown a sharp downward revision in US petroleum demand for the month of February, bolstering fears of demand destruction under way in the world's top oil consumer.
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