Oil slips towards $77

Oil slipped toward $77 a barrel today after US data showed crude inventories in the world's largest energy consumer rose more than expected while refinery utilisation rates fell again.

US commercial stockpiles of crude jumped by 2.3 million barrels to 329 million barrels in the week to January 29, far surpassing analysts' forecasts for a 200,000 barrel increase, the Energy Information Administration (EIA) said.

The numbers confirmed yesterday's data from trade group American Petroleum Institute, showing national crude oil inventories up a whopping 4.7 million barrels.

US refinery utilisation rates were off 0.8 percentage point at 77.7 percent of capacity last week -- their lowest level since 1990 barring hurricane disruptions.

US crude for March delivery fell 15 cents to $77.08 a barrel. London ICE Brent crude for March rose 4 cents at $76.10.

"The EIA data is bearish as the big inventory increase shows that demand is still poor," said Phil Flynn, analyst at PFGBEST Research in Chicago.

"With refinery utilisation at a very low level, refineries are having a hard time as demand just isn't there," he added.

Eugen Weinberg, analyst at Commerzbank in Frankfurt, described the refinery throughout data as "very bearish."

DOLLAR

"Very bearish is the record-low (refinery) utilisation rate of 77.7 percent, not seen before except due to hurricane damage," he said.

Yesterday, US crude soared 3.8 percent, the biggest gain for a front-month contract since September 30, as the dollar dipped on the back of strong corporate earnings reports that boosted risk appetite and on signs China's oil demand will stay high in coming months.

The dollar rebounded today, rising 0.35 percent to 79.289 against a basket of major currencies, just below a six-month high of 79.534 touched earlier this week.

A stronger greenback makes commodities priced in the US currency more expensive for those holding other currencies.

Volatility in the euro and the yen against the dollar will probably rise in coming weeks, while sterling will probably be less volatile, according to the monthly Reuters foreign exchange poll.

Today, Iran, the world's fifth-largest oil exporter, said it had launched a domestically made satellite-carrier rocket carrying live animals into low-Earth orbit, a move that may fan concern about Tehran's nuclear intentions.

Yesterday, Iran made conciliatory remarks over its nuclear program, with President Mahmoud Ahmadinejad offering to send the country's low-enriched uranium in exchange for more highly enriched fuel for a medical research reactor.

Western powers accuse Iran of trying to develop nuclear weapons under a civilian enrichment programme that Tehran says will fuel a future network of nuclear power plants that will free up domestic oil and gas for export.

The United States and Israel have not ruled out military action if diplomacy fails to resolve the row over Iranian nuclear enrichment. Tehran has threatened to hit back at Tel Aviv and US bases in the Gulf if attacked.

In a report late yesterday, the American Petroleum Institute (API) said US crude stocks jumped by 4.7 million barrels last week. That compared to an average forecast gain of 200,000-barrel in a Reuters poll.