Oil prices recovered from an early slide this evening as fears of an escalating euro zone crisis and a North Korean attack on a South Korean island triggered a rally in the US dollar. But prices bounced when a drop to near $80 a barrel attracted buying interest.
The dollar index posted its strongest rise in over a month as questions over Ireland's willingness to adopt an austerity budget threatened to deepen the political crisis and after North Korea fired artillery shells at a South Korean island in one of the heaviest attacks since the 1953 cease fire. A stronger dollar usually weakens oil prices.
But oil later recouped most of its losses as many traders held off selling ahead of the US Thanksgiving holiday on Thursday and amid expectations weekly oil inventory reports will show that stockpiles fell last week.
US crude fell two cents to $81.72 a barrel, while Brent crude fell 20 cents to $83.76. Oil prices have traded in a narrow band the past five days, with volumes slumping as the year-end looms.
US crude stockpiles were expected to have fallen a third straight week following a surprisingly heavy decline a week ago.
