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Oil slips in Asia but further gains seen amid supply concerns

Oil slips in Asia but further gains seen amid supply concerns

Oil slipped in Asia on Tuesday, but traders saying prices could climb higher amid concerns over supplies, growing global demand and other geopolitical issues.
Crude futures pulled back Monday from last week's record highs, falling US$4.19 to US$134.35 a barrel on the New York Mercantile Exchange, after the dollar strengthened and Saudi Arabia voiced willingness to meet any increase in demand.
Late Tuesday afternoon in Singapore, light, sweet crude for July delivery was down 31 cents at US$134.04 a barrel. Earlier, it rose above US$135.
"The market is taking a breather after the very sharp gain last week but it's undeniable we have a strong uptrend in the oil markets. The market is still prone to further price spike," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.
Shum said supplies could be hit if the current Atlantic hurricane season hurts production in the Gulf of Mexico. There are also still jitters over an Israeli cabinet minister's warning of an attack on Iran if it didn't halt its nuclear program, which sent oil prices sharply up Friday, he said.
That prospect appeared to dissipate over the weekend as Israeli Prime Minister Ehud Olmert distanced himself from the comments and other officials noted that the minister had not been expressing official government policy.
"Given the sharp gains we have seen, a further spike to the US$150 level is possible," Shum said.
The jump began Thursday after European Central Bank President Jean-Claude Trichet suggested the bank could increase interest rates in July to counter rising inflation. That sent the dollar falling against the euro. Some investors buy commodities such as oil as a hedge against a weakening dollar.
Crude futures surged 8 percent Friday, touching an all-time high of $139.12 a barrel in after-hours trading.
Prices retreated Monday after the dollar improved against the euro on comments by Treasury Secretary Henry Paulson that he would not rule out intervention to stabilize the U.S. currency. The euro fell to US$1.5572 in Asian trading Tuesday from $1.5651 late Monday in New York.
Saudi Arabia also called for a meeting of oil-producing countries after saying the current price of oil was unjustified. A Saudi minister said the kingdom would work with OPEC to "guarantee the availability of oil supplies now and in the future."
Other factors supporting oil prices included an explosion last week at a natural gas production facility in Australia, which boosted demand for diesel by that country's mining sector, said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut.
In Nigeria, a major U.S. oil supplier, a strike later this week could take 450,000 barrels in daily oil supplies off the market, Armstrong said. Both events highlight how tight oil supplies are.
Friday's sharp US$10.75 jump in oil prices had some of the hallmarks of a "blow-off top," Armstrong said, or a rapid, explosive run-up in prices that's followed by steep declines. Still, it's far to early to tell for sure.
"You never know you've been in a bubble until it's gone," Armstrong added.
In other Nymex trading, heating oil futures rose 4.5 cents to US$3.8815 a gallon. However, gasoline prices dipped 4 cents to US$3.39 a gallon while natural gas futures shed 4 cents to US$12.6 per 1,000 cubic feet.
July Brent crude fell 54 cents to US$133.41 a barrel on the ICE Futures Exchange.
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AP Business Writer John Wilen in New York contributed to this report.