PERTH (Reuters) - Oil fell more than 2 percent to below $69 a barrel on Wednesday, reversing part of the previous day's surge after Democrat Barack Obama's victory in the U.S. Presidential election gave a boost to the dollar.
Obama defeated Republican John McCain to be the first black elected U.S. President. Markets had rallied sharply on Tuesday, partly on anticipation of the victory, which some analysts said should help extend the U.S. dollar's recovery.
U.S. light crude for December delivery fell $1.46 cents to $69.07 a barrel by 0448 GMT, after falling as much as $2.08. London Brent crude fell $1.44 to $65.
"But by and large, this is a favorable longer-term development for the U.S. economy so with that in mind, this is basically a good thing," said Jim Ritterbusch, president of Ritterbusch & Associates, but he added that there was little immediate material impact to oil markets.
Analysts said Obama's victory may inject a degree of optimism that America can again reinvent itself, but the world's largest economy still faces recessionary forces and Obama will be under immense pressure to reinvigorate the economy.
The dollar -- which posted its biggest one-day slide against the euro since that currency's 1999 launch on Tuesday -- rebounded against major currencies on Wednesday, rising more than 1 percent against the euro after Obama's victory.
Traders' focus later in the day is likely to turn to the more immediate issue of weekly U.S. oil inventories, with crude oil stocks expected to have risen by 1.1 million barrels last week, while distillates stocks were seen rising by 1.4 million barrels and gasoline stocks falling 800,000 barrels.
Crude prices have fallen by about half from a record above $147 a barrel in July as the global credit crisis hit the wider economy, damping fuel demand in major consumer nations.
OPEC CUTS
Buoyed by Saudi Arabia and other OPEC members had made cuts in crude exports, oil surged $6.62 or 10.36 percent on Tuesday, the largest one-day gain since September 22, when it soared nearly 16 percent ahead of contract expiry and weakness in the U.S. dollar.
The rally was also helped by a tumble in the U.S. dollar as investors bet that global interest rate cuts and a credit market thaw would alleviate the global financial crisis.
Saudi Arabia has reduced exports after the Organization of the Petroleum Exporting Countries agreed last month to lower output, according to trade sources, with some estimating the world's top exporter had cut shipments by around 900,000 barrels per day (bpd) from a peak in August.
In addition to Saudi Arabia, other OPEC members including Venezuela, the United Arab Emirates and Qatar were also showing signs of throttling back output in line with an OPEC decision last month to cut output by 1.5 million bpd.
