Oil futures extended their
slide Tuesday as the dollar gained ground, making commodities such as
energy futures less attractive to investors seeking a hedge against
inflation. But trading was choppy as a debate among investors over
oil's direction played out in the marketplace.
Retail gas prices, meanwhile, slipped slightly from the record they set one day earlier.
Investors
who previously bought commodities such as oil as a haven against
inflation and a falling dollar sold Tuesday as the greenback
strengthened against the euro and other currencies. The stronger dollar
also made oil more expensive to overseas investors.
Many analysts say oil investors have taken most of their price cues in recent months from gyrations in the dollar.
"The
dollar's stronger, and (therefore) oil's weaker," said Brad Samples, an
analyst with Summit Energy Services Inc., in Louisville, Ky.
Light,
sweet crude for May delivery fell 60 cents to settle at $100.98 a
barrel on the New York Mercantile Exchange after earlier falling as low
as $99.55. Oil futures fell $4.04 a barrel on Monday.
But oil
prices surged as high as $102.55 at times Tuesday as the early dip
below the psychologically important $100 level drew buyers betting that
high demand will give crude prices room for a further advance. Many
large funds that invest in commodities such as oil craft strategies for
their traders to automatically buy when prices fall to what they
consider key support levels.
The strategies are based on a theory
that global demand for oil supports higher prices, despite falling
demand and higher supplies in the U.S.
"There's a lot of technical support down below $100," said Phil Flynn, an analyst at Alaron Trading Corp., in Chicago.
Tuesday's
oil price uncertainty reflects a debate among investors over oil's
future direction. Many analysts believe dollar-induced buying has
driven oil prices far beyond levels that can be justified by supply and
demand or economic conditions. The second quarter of the year, which
began Tuesday, typically sees the lowest petroleum demand. The
country's appetite for oil and gasoline have fallen sharply since
January, and oil supplies have mostly risen in recent weeks.
But
other investors see continued strong demand for oil and fuel from China
and India as a sign that oil prices have further to rise, despite
demand and supply dynamics in the U.S.
"They think that $99 and $100 oil is on sale," said James Cordier, founder of OptionSellers.com, a Tampa, Fla., trading firm.
Indeed,
Cordier notes that previous dips below the $100 level over the past
month have been quickly followed by rallies. Oil settled below $100
only once in March, after reaching that milestone for the first time in
February.
Soaring crude prices have sent fuel prices higher,
despite the fact that the high cost of gasoline has depressed demand.
At the pump, the national average price of a gallon of gas slipped 0.1
cent Tuesday to $3.286 a gallon, according to AAA and the Oil Price
Information Service. While that's a slight retreat from Monday's
record, gas prices remain 60 cents higher than a year ago, and are
expected to rise as high as $3.50 or $4 a gallon this spring as
suppliers stock up in advance of peak summer driving season.
Executives
of the five biggest private oil companies were called to task for high
prices by Congress Tuesday. But while the executives said they realize
high fuel prices are hurting consumers, they said the $123 billion they
earned last year in profits was in line with other industries.
Other
energy futures were mixed Tuesday. In other Nymex trading, May heating
oil futures fell 2.64 cents to settle at $2.8797 a gallon while May
gasoline futures rose 1.21 cents to settle at $2.6392 a gallon. May
natural gas futures fell 37.7 cents to settle at $9.724 per 1,000 cubic
feet.
In London, May Brent crude fell 13 cents to settle at $100.17 a barrel on the ICE Futures exchange. (***)
