Oil slips but sees biggest annual gain this decade

Iran's nuclear standoff with the West, which accuses Tehran of seeking nuclear weapons, has been a major factor in oil's climb to record heights this year.

Adding support to dollar-denominated commodities, the dollar fell versus a basket of major currencies on expectations the Federal Reserve will have to lower interest rates further to stave off a recession.

The U.S. dollar is on track to have its weakest year in four years.

OIL'S CLIMB

Oil's 57 percent gain from the start of the year marks the biggest annual rise for a front-month contract since 1999, when prices more than doubled from a $10-a-barrel low.

The price of oil has quadrupled in four years, driven by surging demand from China and other developing economies alongside OPEC production cuts, a weak dollar, and rising geopolitical turmoil.

Energy analysts expect oil prices to average $77.62 a barrel in 2008, up from about $72.30 a barrel this year, according to a Reuters poll.

Last January, experts polled by Reuters undershot the 2007 oil price by nearly $10 a barrel, with a consensus forecast calling for an average $63.23.

(Reporting by Matthew Robinson and Richard Valdmanis, additional reporting by Randy Fabi in London, Fayen Wong in Sydney, editing by Jim Marshall)