Jan. 4 (Bloomberg) -- Crude oil fell the most in seven weeks in New York as commodities including precious metals tumbled and the dollar strengthened. Futures dropped from the highest level in 27 months amid signals that a global economic recovery will boost investments in currencies and equities. Gains in the dollar reduce demand for commodities priced in the U.S. currency. Oil climbed 8.6 percent last month as the greenback dropped 3 percent. “Part of what the commodities rally was all about was they were the currency of last resort in terms of storing value,” said John Kilduff, a partner at Again Capital LLC in New York. “Economic prospects are helping the dollar.” Crude for February delivery fell $2.17, or 2.4 percent, to settle at $89.38 a barrel on the New York Mercantile Exchange, the biggest decline since Nov. 16. Oil touched $92.58 yesterday, the highest intraday price since Oct. 7, 2008. Futures gained 15 percent last year. Prices were unchanged from the settlement at $89.38 a barrel after the American Petroleum Institute reported at 4:30 p.m. that U.S. crude-oil stockpiles decreased 7.51 million barrels to 337.1 million. Brent crude for February settlement fell $1.31, or 1.4 percent, to $93.53 a barrel on the ICE Futures Europe exchange in London. The dollar gained 0.5 percent to $1.3299 per euro at 3:25 p.m. in New York. The currency strengthened 6.5 percent in 2010. U.S. equities were mixed, with the Standard & Poor’s 500 Index retreating from the highest level since September 2008. The S&P 500 slipped by 1.96 points to 1,269.91 at 3:25 p.m. in New York. The Dow Jones Industrial Average gained 25.77 points, or 0.2 percent, to 11,696.52. Economic Optimism “This has been an economic optimism rally,” said Phil Flynn, vice president of research at PFGBest in Chicago. U.S. factory bookings unexpectedly rose in November, signaling that business investments and exports will keep contributing to economic growth. Commodity prices beat increases in stocks, bonds and the dollar last year as China led a recovery from the first global economic recession since World War II. The Thomson Reuters/Jefferies CRB Index of 19 commodities advanced 17 percent in 2010, while the MSCI All Country World Index of stocks rose 13 percent with dividends reinvested. The CRB index declined 1.6 percent to 327.73 at 3:25 p.m. in New York, led by drops gold, silver, cocoa, sugar and oil. Yesterday, it reached the highest level since Oct. 1, 2008. Gold Falls Gold fell the most in six months, with futures for February delivery plunging $44.10, or 3.1 percent, to settle at $1,378.80 an ounce on the Comex in New York, the biggest decline for a most-active contract since July 1. The metal rose to a record settlement yesterday. Silver futures for March delivery dropped $1.617, or 5.2 percent, to $29.508 an ounce on the Comex, the biggest decline since Nov. 12. Yesterday, it reached a 30-year high of $31.275. Oil also decreased today as U.S. gasoline demand at the pump plunged 13 percent to the lowest level since Hurricane Katrina disrupted Gulf Coast supplies in September 2005, according to data in a MasterCard Inc. SpendingPulse report. Motorists bought an average 8.41 million barrels a day in the week ended Dec. 31, down from 9.61 million the previous week. Gasoline for February delivery fell 1.33 cents, or 0.6 percent, to settle at $2.414 a gallon on the Nymex. Futures have retreated for the past two days, since closing at $2.4532 a gallon on Dec. 31, the highest level since September 2008. Oil is “going to go to $80.50,” said Ray Carbone, president of Paramount Options Inc. in New York. “That’s a pullback low. It’s been the low many times over the last two- and-a-half months. Each time we went down there we rallied.” Hedge Funds Hedge funds raised bullish bets on crude oil to the highest level in more than four years last week on speculation that futures will climb. The funds and other large speculators increased net-long positions, or wagers on rising prices, by 4.6 percent in the seven days ended Dec. 28, according to the Commodity Futures Trading Commission’s weekly Commitments of Traders report. It was the biggest total in records going back to June 2006. “Everyone’s talking about $100 as if it’s a foregone conclusion,” said Matt Smith, a commodities analyst for Summit Energy in Louisville, Kentucky. Oil supplies probably fell for a fifth week through Dec. 31 as refiners along the Gulf Coast lowered stockpiles to reduce year-end tax liabilities, a Bloomberg News survey showed. U.S. Inventory Data U.S. inventories dropped 2 million barrels in the seven days ended Dec. 31 from 339.4 million a week earlier, according to the median of 17 analyst estimates before an Energy Department report tomorrow. Analysts have forecast refiners will replenish stockpiles in January. Oil volume in electronic trading on the Nymex was 751,635 contracts as of 3:29 p.m. in New York. Volume totaled 459,184 contracts yesterday, 27 percent below the average of the past three months. Open interest was 1.46 million contracts, the highest level since Nov. 12. To contact the reporter on this story: Margot Habiby in Dallas at [email protected] . To contact the editor responsible for this story: Dan Stets at [email protected] .
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