NEW YORK?Oil prices retreated Monday on a strong dollar after surging to the highest level in 18 months.
New York futures contract, light sweet crude for April delivery dropped 96 cents to $78.70 a barrel after hitting an intra day high of $80.62 -- the highest level since mid-January.
London's Brent North Sea crude for April lost 70 cents to $76.89.
Independent analyst Ellis Eckland said prices fell in "a reaction to the strong dollar."
A stronger greenback weighs on dollar-denominated crude because the commodity becomes more expensive for buyers holding weaker currencies.
London's Brent North Sea at the same maturity has lost 70 cents to $76.89.
"There is no other factor, there is no inventory number, the main driver is the currency. People are buying dollars," Eckland said.
But Eckland said that breaking the symbolic barrier of $80 a barrel was nonetheless significant.
"Eighty (dollars) is a very significant barrier, if it breaks through 80 convincingly it is probably going to go higher," he said.
The market began strongly after shooting higher last Friday in the wake of stronger-than-expected economic growth in the United States, the world's top energy consuming country.
"The United States' better-than-expected revised GDP numbers on Friday helped build confidence," said ODL analyst Marius Paun.
The US Commerce Department on Monday reported that US consumer spending rose more than expected in January, with personal expenditures up 0.5 percent.
Meanwhile the Institute for Supply Management said the US' rebounding manufacturing sector grew for the seventh consecutive month in February, albeit at a slower clip than expected.
"Further bullish news from Europe with regards to a stable jobs market has given market bulls reason to believe that the economic recovery will not pull back and demand will not wane," said Paun.
Unemployment in the 16-nation eurozone remained at 9.9 percent in January, providing more evidence that Europe's recovery from the worst recession in decades is a largely jobless one, official data showed on Monday.
The crumb of comfort was that December's first estimate of a double-digit unemployment rate was revised back to 9.9 percent.
On Friday, New York crude had rallied $1.49 and London Brent gained $1.30, after revised data showed the US economy grew 5.9 percent in the fourth quarter of 2009 -- 0.2 percentage points more than the initial estimate.
Despite rising prices, analysts said the market could be hit by a report showing that China's manufacturing sector posted slower-than-expected growth in February. China is the world's second biggest energy consuming nation.
China's official purchasing managers index fell to 52 in February from 55.8 in January as the sector slowed due to factory closures during the Lunar New Year holidays.
A reading of above 50 indicates growth.
