Oil fell by nearly $2 per barrel on Thursday to about $78, dragged down by a rise in the dollar as the euro slid on concerns about the outlook for the European economy and after a surprise jump in US unemployment.   

The euro fell to a one-year low against the yen and was down versus the dollar on uncertainty over the ability of the Greek government to cope with its fiscal crisis, while the dollar's trade-weighted index rebounded.

US crude futures for April were down $1.80 per barrel at $78.20 by 1420 GMT, after hitting a low of $77.88. The contract rose more than $1 on Wednesday, lifted by comments by U.S. Federal Reserve Chairman Ben Bernanke, who stressed his commitment to low US interest rates.

London Brent crude lost $1.68 to $76.41 a barrel.   

A firmer dollar makes oil and other commodities more expensive for holders of other currencies, and also dragged gold down to near a two-week low.
US jobless claims data meanwhile suggested the world's biggest energy consumer was recovering more slowly than expected. The number of US workers filing initial claims for unemployment benefits rose unexpectedly in the latest week, a US Labor Department report showed on Thursday.

Carsten Fritsch, analyst at Commerzbank, said the rise in the dollar had started the move lower. "The dollar put pressure on commodities prices across the board," he said "It is encouraging profit-taking after recent price gains, which clearly don't seem to be justified by fundamentals."    

Oil prices have risen by around $10 per barrel since hitting a low below $70 in the first week of February and are still close to the top of their trading range over the last year.

Edward Meir, analyst at brokers MF Global, said he saw the direction of the dollar as "the predominant guiding force" in the oil market. "We suspect that the dollar still has more room to run on the upside...and as a result, should keep the downward pressure on commodities for a little while longer," Meir said.

US data this week has dampened expectations of a quick rebound from the deep economic slowdown of the last two years. US crude oil stockpiles rose by 3 million barrels to 337.5 million barrels in week ended Feb 19, data from the Energy Information Agency showed on Wednesday. But US gasoline inventories fell 900,000 barrels to 231.2 million barrels, versus analysts estimates of a 400,000-barrel build. - Reuters