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Oil prices give up earlier gains, head lower on stronger dollar, demand forecast

Oil prices give up earlier gains, head lower on stronger dollar, demand forecast

Oil prices fluctuated Tuesday, giving up an earlier advance and falling as the dollar held its gains against the euro and the U.S. government slashed its oil consumption projections.
Light, sweet crude for July delivery fell 55 cents to $133.80 a barrel on the New York Mercantile Exchange while, in London, July Brent crude fell 41 cents to $133.49 on the ICE Futures exchange.
Earlier, the contract had bucked the strengthening dollar, gaining more than $3 per barrel at times, following a report by the International Energy Agency _ an energy adviser to Western industrialized nations _ that said global demand will continue to rise, especially in China. The IEA said demand for fuel for reconstruction work in the aftermath of May's earthquake will boost Chinese oil demand by 5.5 percent this year, a slightly higher forecast than in previous reports.
But in volatile trading, investors latched on to comments by U.S. officials on Monday, when Treasury Secretary Henry Paulson said he would not rule out the possibility of intervening to stabilize the dollar. That comment, and others, prompted selling by investors who had bought commodities such as oil as a hedge against inflation. Also, a stronger dollar makes oil more expensive to investors overseas.
"You don't get a lot of ... additional buying when the dollar is strong," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Illinois.
A U.S. Energy Department monthly report also added downward pressure, as the department indicated that high prices are cutting oil consumption more than expected in the industrialized world. Consumption is now expected to fall by 240,000 barrels a day in 2008. Last month, the department forecast consumption would be unchanged from 2007 levels.
The market appeared to react little to reports Tuesday that Saudi Arabia has increased oil output by 500,000 barrels a day this quarter, 200,000 barrels a day more than previously thought.
"A couple hundred thousand barrels just isn't enough," Ritterbusch said.
In other Nymex trading, July gasoline futures fell 1.25 cents to $3.3815 a gallon, and July heating oil futures fell 0.75 cents to $3.8695 a gallon. July natural gas futures fell 4.9 cents to $12.555 per 1,000 cubic feet.


Updated : 2021-01-23 06:59 GMT+08:00