* STORY * VIDEO * Oil Drops Below $76 on Industry Report; Poised for Weekly Fall

Dec. 4 (Bloomberg) -- Crude oil dropped below $76 a barrel, poised for a weekly decline, after falling as a report showed service industries in the U.S. unexpectedly contracted in November, a sign fuel demand may be slow to recover.

Oil declined for a third day after the Institute for Supply Management’s index of non-manufacturing businesses that make up almost 90 percent of the economy narrowed to 48.7 from 50.6 in October, the Tempe, Arizona-based group said yesterday. A Labor Department report today will probably show that the U.S. economy lost jobs in November, according to a Bloomberg News survey.

“The ISM non-manufacturing index reading was weaker than expected and that raised some investor anxiety ahead of the employment report,” said Toby Hassall, a research analyst with CWA Global Markets Pty in Sydney. “Policy makers have indicated they see the recovery as being very uneven, and I expect the unemployment rate to stay elevated for an extended period.”

Crude oil for January delivery dropped as much as 85 cents, or 1.1 percent, to $75.61 a barrel in electronic trading on the New York Mercantile Exchange. It was at $75.68 at 12:16 p.m. Sydney time. Yesterday, the contract fell 14 cents to $76.46. Prices, which are up 70 percent this year, are poised for a 0.5 percent weekly decline.

The Labor Department may say today in a report that U.S. employers dropped 125,000 non-farm workers from their payrolls, according to the median forecast of 81 economists surveyed by Bloomberg News.

“The weaker dollar has been a very supportive element for oil,” Hassall said. “There is nothing to suggest the longer term downward trend in the dollar is about to break.”

Dollar Decline

The euro rose against the dollar and the yen as European Central Bank President Jean-Claude Trichet announced yesterday the first steps toward scaling back emergency lending designed to revive the region’s economy. The greenback traded at $1.5057 per euro at 12:19 p.m. in Sydney, from $1.5053 yesterday.

A weaker dollar increases the appeal of commodities as an alternative investment.

U.S. equities declined, breaking a three-day winning streak for the Standard & Poor’s 500 Index. The S&P 500 fell 0.8 percent in New York yesterday after rising as much as 0.7 percent. Australia’s benchmark S&P/ASX 200 lost 1.2 percent at 12:19 a.m. in Sydney.

Oil declined 2.3 percent on Dec. 2 after the U.S. Energy Department reported crude oil supplies rose 2.09 million barrels to 339.9 million, the highest level since August. Gasoline stockpiles increased 4 million barrels, the report showed.

Brent crude oil for January settlement dropped 64 cents, or 0.8 percent, to $77.72 a barrel on the London-based ICE Futures Europe exchange at 12:19 p.m. in Sydney. Yesterday, the contract rose 48 cents, or 0.6 percent, to $78.36.