Oil fell more than 3 percent towards $68 a barrel on Wednesday, reversing part of the previous day's surge after Democrat Barack Obama's victory in the US Presidential election gave a boost to the dollar. Obama defeated Republican John McCain to be the first black elected US President. Markets had rallied sharply on Tuesday, partly on anticipation of the victory, which some analysts said should help extend the US dollar's recovery.
US light crude for December delivery fell $2.36 cents to $68.17 a barrel by 0721 GMT. London Brent crude fell $2.48 to $63.96. "By and large, this is a favourable longer-term development for the US economy so with that in mind, this is basically a good thing," said Jim Ritterbusch, president of Ritterbusch & Associates, but he added that there was little immediate material impact to oil markets.
Analysts said Obama's victory may inject a degree of optimism that America can again reinvent itself, but the world's largest economy still faces recessionary forces and Obama will be under immense pressure to reinvigorate the economy. The dollar - which posted its biggest one-day slide against the euro since that currency's 1999 launch on Tuesday - rebounded against major currencies on Wednesday, rising more than 1 percent against the euro after Obama's victory.
Traders' focus later in the day is likely to turn to the more immediate issue of weekly US oil inventories, with crude oil stocks expected to have risen by 1.1 million barrels last week, while distillates stocks were seen rising by 1.4 million barrels and gasoline stocks falling 800,000 barrels. Crude prices have fallen by about half from a record above $147 a barrel in July as the global credit crisis hit the wider economy, dampening fuel demand in major consumer nations.
OPEC CUTS: Buoyed by Saudi Arabia and other Opec members had made cuts in crude exports, oil surged $6.62 or 10.36 percent on Tuesday, the largest one-day gain since September 22, when it soared nearly 16 percent ahead of contract expiry and weakness in the US dollar.