U.S. crude oil falls as dollar strengthens

NEW YORK (Reuters) - Oil slumped on Thursday as gains in the U.S. dollar and rising fuel production from U.S. refineries spurred profit-taking that dragged crude further from its record peak near $120 a barrel.

U.S. crude settled down $2.24 to $116.06 per barrel after falling as low as $114.25. London Brent settled $2.12 lower at $114.34 a barrel.

Oil and other dollar-denominated commodities came under pressure after data showed U.S. jobless claims down sharply last week, boosting the dollar by more than 1 percent against a basket of major currencies.

"This morning's sell-off has been engineered by the strengthening of the dollar," said Nauman Barakat, senior vice president at Macquarie Futures USA.

Gold, copper, and agricultural products also fell as the dollar gained.

The sliding dollar has devalued U.S. financial assets, prompting investors to shift cash to commodities that helped lift crude to an all-time high of $119.90 on Tuesday.

Oil also came under pressure from expectations of rising fuel production from U.S. refineries heading into the summer driving season. U.S. government data on Wednesday showed refinery utilization rates jumped by 4.2 percentage points to 85.6 percent of capacity.

Production disruptions in Nigeria helped moderate oil's pullback, and a planned two-day strike at a Scottish refinery that could affect 700,000 barrels per day of North Sea crude supplies also supported oil.

Talks to resolve a pension dispute at the 200,000 bpd Grangemouth refinery collapsed late on Wednesday, and union officials said the work stoppage will proceed on Sunday.