Oil prices slipped further Friday after falling more than US$2
a barrel in the previous session as the U.S. dollar strengthened,
prompting investors to book profits.
Oil stalled in its march toward US$120 a barrel on Thursday
after the greenback gained against the euro. Investors see commodities such as oil as a less effective hedge against inflation when the dollar strengthens. A stronger greenback also
makes oil more expensive to investors overseas.
"Oil's bull run is taking a pause," said Victor Shum, an
energy analyst with Purvin & Gertz in Singapore.
"Oil pricing has simply gained too much, too fast, and so this
profit-taking activity is much deserved."
Light, sweet crude for June delivery fell 1.46 U.S. cents to
$114.60 a barrel in Asian electronic trading on the New York
Mercantile Exchange by midafternoon in Singapore.
The contract dropped $2.24 overnight to settle at $116.06 a
barrel on the New York Mercantile Exchange. It sank as low as
$114.25 a barrel during the session.
Analysts said the dollar gained ground Thursday on speculation
the Federal Reserve is growing concerned about inflation and may
not cut interest rates as much as once thought.
Higher interest rates tend to stabilize or strengthen the
dollar.
"The current thinking is that the U.S. dollar may be bottoming
out, and so market participants therefore unwound some of their
positions in oil and took some profits," Shum said.
Few analysts are willing to predict that oil's record run is
over. Investors remain concerned about tight supplies of oil amid
growing global demand, they say.
"Supply concerns will still underpin oil pricing, so the
pullback won't be very substantial," Shum said.
Feeding those concerns, about 170,000 barrels a day of
Nigerian production remained shut-in following a pipeline attack
late last week. BP PLC is also considering shutting down its
700,000 barrel-a-day Forties pipeline system if a strike
continues at a UK refinery.
In other Nymex trading, heating oil futures fell 1.83 U.S.
cents to $3.24 a gallon (3.8 liters) while gasoline prices
dropped 2.36 U.S. cents to $2.995 a gallon. Natural gas futures
lost 3.7 U.S. cents to $10.753 per 1,000 cubic feet.
Brent crude futures fell $1.50 to US$112.84 a barrel on the
ICE Futures exchange in London. (****)
