OIL slumped yesterday as gains in the US dollar and rising fuel production from US refineries spurred profit-taking that dragged crude further from its record peak near US$120 a barrel.
US crude settled down US$2.24 to US$116.06 per barrel after falling as low as US$114.25. London Brent settled US$2.12 lower at US$114.34 a barrel.
Oil and other dollar-denominated commodities came under pressure after data showed US jobless claims down sharply last week, boosting the dollar by more than 1 percent against a basket of major currencies.
"This morning's sell-off has been engineered by the strengthening of the dollar," said Nauman Barakat, senior vice president at Macquarie Futures USA.
Gold, copper, and agricultural products also fell as the dollar gained.
The sliding dollar has devalued US financial assets, prompting investors to shift cash to commodities that helped lift crude to an all-time high of US$119.90 on Tuesday.
Oil also came under pressure from expectations of rising fuel production from US refineries heading into the summer driving season. US government data on Wednesday showed refinery utilization rates jumped by 4.2 percentage points to 85.6 percent of capacity.
Production disruptions in Nigeria helped moderate oil's pullback, and a planned two-day strike at a Scottish refinery that could affect 700,000 barrels per day of North Sea crude supplies also supported oil.
Talks to resolve a pension dispute at the 200,000 bpd Grangemouth refinery collapsed late on Wednesday, and union officials said the work stoppage will proceed on Sunday.
The refinery has been closing gradually over the last week and its power station, which also supplies BP's nearby Kinneil Forties crude oil processing plant, is due to shut on Saturday.
The looming strike sent London's gas oil futures, the European benchmark for distillate products such heating fuel and diesel, to new highs. The shutdown of a diesel line at Finish refiner Neste Oil's Porvoo refinery through the end of May also buoyed gas oil.
Rebel attacks have shut 169,000 bpd of Royal Dutch Shell in Nigeria.
In Libya, 45,000 bpd of Libyan offshore oil production had been halted due to a technical problem and could be off line for a few weeks, the head of Libya's National Oil Corporation (NOC) said Thursday.