Oil falls more than $2 on equities, dollar

NEW YORK (Reuters) - U.S. crude futures fell more than 2 percent on Thursday as a stronger dollar weighed and weaker equities raised concern about the economy and a potential rebound in energy demand.

U.S. crude prices for December delivery fell $2.12 to settle at $77.46 a barrel. Brent crude for January delivery fell $1.83 to settle at $77.64 a barrel.

"Crude futures are down today because the stock market is under selling pressure as investors are assessing where the economy is really going," said Peter Beutel, president of Cameron Hanover in Stamford, Connecticut.

Investors have scoured economic data in recent months for signs of a recovery that might boost global energy demand.

U.S. stocks fell, with all major indexes down more than 1 percent on weakness in the technology and health insurance sectors. .N

The dollar rose against the euro on Thursday, moving up from 15-month lows earlier in the week. A stronger dollar makes dollar-denominated commodities like oil more expensive for holders of other currencies and tends to pressure prices.

Data showed the number of additional U.S. workers claiming unemployment benefits was unchanged at 505,000 in the week ending November 14.

U.S. oil prices rose on Wednesday above $80 a barrel level after government data showed a drop in crude and product inventories in the world's largest oil consumer. <EIA/S>

Crude stocks fell a more-than-expected 900,000 barrels and while distillate stocks including diesel and heating oil fell 300,000 barrels.

FLOATING STOCKS

Analysts said mild weather in the United States and high global oil products stocks held in storage on land and on floating vessels would limit oil's potential upside.

Floating stocks of oil products, mostly distillates, are set to rise to over 97 million barrels by the end of the year, according to Reuters estimates.

The U.S. National Weather Service forecast warmer-than-average temperatures for the northern and western United States this December.

"Temperatures are unseasonably mild in the United States and crude is holding the range between the high $70s and low $80s," said Peter McGuire, managing director of CWA Global Markets.

Since hitting a high of $82 a barrel in October, U.S. prices have traded in a narrow $7 band.

On the supply side, the Organization of the Petroleum Exporting Countries should hold oil output steady when it meets in December as current prices do not suggest the need to change supply, the head of Libya's National Oil Corporation said on Wednesday.

Implied oil volatility is the lowest since February 2008, back near levels before last year's surge to a record high.