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Oil slips, rally cut short by dollar and Greek worry

A woman pumps gas at a station in Falls Church, Virginia December 16, 2014. REUTERS/Kevin Lamarque
A woman pumps gas at a station in Falls Church, Virginia December 16, 2014. REUTERS/Kevin Lamarque

By Barani Krishnan

NEW YORK (Reuters) - Crude oil prices fell on Thursday as players took profits from the past two days of gains, turning bearish after the dollar's rise against the euro on Greek debt worries weighed on demand for commodities.

A positive outlook for oil from the International Energy Agency (IEA) was offset by the dollar's first rally in five days against a basket of currencies (.DXY). A stronger dollar makes commodities denominated in the greenback, including oil, costlier for other currency users.

The euro (EUR=) extended losses after International Monetary Fund spokesman Gerry Rice said "major differences" remained with Greece over an agreement to save the country from bankruptcy. IMF's technical team has returned from Brussels, where it had been in talks with Greek officials, although the IMF was still "fully engaged" with Athens, Rice said.

"Oil continues to slip and slide when it gets bad news out of Greece," said Phil Flynn, analyst at Chicago-based Price Futures Group.Both U.S. and Brent crude futures fell more than $1 a barrel before paring losses on short-covering by those wary of a potential resurgence, analysts said.

The dollar's retreat from its highs also helped oil regain some footing.

"There's still some uncertainty about the market's near-term direction," said Sal Umek at the Energy Management Institute in New York.

Brent (LCOc1) settled down 59 cents, or about 1 percent, at $65.11 a barrel, after plumbing an intraday low at $64.50.

U.S. crude (CLc1) settled down 66 cents, or 1 percent, at $60.77, after a session low at $60.21.

Oil jumped about 5 percent the past two days, rallying ahead and after bullish weekly stock draws data from the U.S. government. [EIA/S]

On Thursday, market intelligence firm Genscape disclosed further draws at the Cushing, Oklahoma delivery hub for U.S. crude, said sources who saw the data.

Cushing inventories fell by about 750,000 barrels in the week to June 9, the sources said. But the drop was more modest, at around 52,000 barrels, if measured from June 5.

The IEA raised its projection for global oil demand growth in 2015 by 280,000 barrels per day to 1.4 million bpd, bringing this year's demand to almost 94 million bpd.

Even so, the World Bank cut its global growth outlook for this year to 2.8 percent from a 3 percent forecast in January. It urged countries to "fasten their seat belts" as they adjust to lower commodity prices and a looming rise in U.S. interest rates.

(Additional reporting by Vladimir Soldatkin in London and Henning Gloystein in Singapore; Editing by Chris Reese and Jonathan Oatis)