Oil slips as dollar rises

London (Reuters): Oil fell toward $81 on Tuesday as the dollar gained after a major exchange of artillery fire on the Korean peninsula and as the euro fell on fears Ireland’s debt crisis may lead to problems elsewhere in Europe.

US crude for January shed 20 cents to $81.54 a barrel by 4:03 a.m. ET, after having dropped 71 cents on Monday. Oil and commodities often move inversely to the dollar, partly because many of them are priced in the U.S. currency.

“This is a trigger for the ‘risk off’ button. You’ll certainly see selling in risk-based markets like equities and commodities until we get a better read on events,” said Mark Pervan, senior commodities analyst at ANZ in Melbourne.

Jeong My-Young, foreign exchange strategist at Samsung Futures, said the Korean incident prompted investors to close dollar short positions against all currencies.

“This kind of incident can trigger automatic stop-loss selling of non-dollar currencies,” he said.

“Further oil market volatility cannot be excluded as Irish domestic political developments may yet slow the negotiation of the aid package with the EU/IMF, and that attention will at some point shift its focus to other euro zone economies,” JPMorgan analysts said in a note.

Hopes of a drawdown in U.S. crude stocks in the week to November 19, reflecting better demand at the world’s top energy consumer, may support prices.

Industry data from the United States due at 4:30 p.m. ET is expected to show a third week of decline for crude inventories following a surprise heavy drawdown in the previous week, a Reuters poll showed on Monday.