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Oil prices fall below $118 on stronger dollar

Oil prices fall below $118 on stronger dollar

Oil prices slipped back below $118 a barrel Friday, as a stronger dollar outweighed worries of possible global supply cuts amid tensions with Russia.
A day after surging nearly $6 a barrel, crude reversed course and wiped out some of those gains as the U.S. dollar gained ground on comments by Federal Reserve Chairman Ben Bernanke that he would "act as necessary" to control inflation.
A falling greenback encourages selling from investors who bought crude oil and other commodities as a hedge against inflation and weakness in the U.S. currency. The euro fell to $1.47928 in early New York trading Friday from $1.4877 the night before.
"The dollar got pounded yesterday and everybody rushed to buy commodities as a safe haven. Now the dollar is strengthening so everybody's dumping commodities again," said Phil Flynn, analyst at Alaron Trading Corp. in Chicago.
Light, sweet crude for October delivery fell $3.58 to $117.60 a barrel in late-morning trading on the New York Mercantile Exchange. On Thursday, worries about Russian hostilities against Georgia and NATO pushed prices up $5.62 to $121.18, crude's highest settlement price in over two weeks.
In London, October Brent crude fell $3.58 to $116.58 a barrel.
Russian troops showed some signs of withdrawing from key Georgian cities on Friday, the day Russia's president said a pullback would be complete under an EU-sponsored cease-fire. But oil market traders were still eyeing the conflict amid concerns that another flare-up of violence could sever key oil shipments bound for Western countries.
"It's still speculative whether Russia will use oil as a weapon to punish the West," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore. "But it has certainly focused the market on that geopolitical threat."
The United States and Poland signed a deal Wednesday to place a U.S. missile defense base just 115 miles (185 kilometers) from Russia's westernmost border, a provocative move that was immediately denounced by Moscow.
Russia's Foreign Ministry warned that Moscow's response to further development of the missile defense shield would go beyond diplomacy.
U.S. Secretary of State Condoleezza Rice has dismissed any suggestion that the missile defense interceptors to be based in Poland constitute a threat to Russia. Washington insists the base is intended only as a defense against long-distance missiles from Iran.
London-based BP PLC last week shut down its Baku-Supsa oil pipeline _ which runs through the center of Georgia from Baku in Azerbaijan to Supsa on Georgia's Black Sea coast _ because of security concerns.
The line, which has a 150,000-barrel-a-day capacity, had recently been pumping around 90,000 barrels a day, according to a BP spokeswoman.
The British oil company also said that testing was to begin Wednesday on the closed Baku-Tbilisi-Ceyhan oil pipeline _ which runs through Georgia as well _ ahead of a move to restart full operations as early as next week.
That line, owned by a consortium of energy companies led by BP, has been closed for more than two weeks after a fire on its Turkish stretch. Kurdish rebels have taken responsibility for that blaze.
In other Nymex trading, heating oil futures fell 9.78 cents to $3.20280 a gallon, while gasoline prices lost 9.97 cents to $2.9495 a gallon. Natural gas futures shed 13.3 cents to $8.119 per 1,000 cubic feet.
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Associated Press writers Pablo Gorondi in Budapest, Hungary and Alex Kennedy in Singapore contributed to this report.


Updated : 2021-07-25 15:40 GMT+08:00