Oil prices steady at $110 a barrel

Oil prices held around $110 a barrel today, as a rebound in the dollar against the euro and Saudi Arabia's comment that markets were well supplied led investors to reduce positions, but firm Chinese demand lent support.

US light crude for May delivery which has gained 14 per cent so far this year, fell to as low as $109.49 a barrel, steadying at $110.10 by 8.09am, down a cent. London Brent crude gained 25 cents to $108.45 a barrel.

The market hit a record high of $112.21 a barrel on Wednesday, after government data showed a surprise drop in crude oil and fuel supplies.

The price decline came after the dollar surged from record lows against the euro as European Central Bank President Jean-Claude Trichet expressed concerns over high inflation, sluggish growth and foreign exchange volatility.

The recent weakness in the US currency has prompted funds to buy dollar-denominated commodities, pushing up prices of crude oil, gold, metals and grains.

But worries over oil demand in top user the United States undermined prices, as fresh signs of a fast-weakening economy more than offset concerns about falling US inventories.

The US commercial paper sector shrank for a second straight week to $1.817 trillion in the week ended April 9th, down $10.8 billion from a week earlier, as a slipping economy exacerbated the credit market strains buffeting short-term loan markets.

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