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Oil prices drop below $116 a barrel

Oil prices drop below $116 a barrel
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First Published: Fri, Apr 25 2008. 03 10 PM IST
Updated: Fri, Apr 25 2008. 03 10 PM IST
By Gillian Wong / AP
Singapore: Oil prices slipped further on 25 April after falling more than $2 a barrel in the previous session as the U.S. dollar strengthened, prompting investors to book profits.
During Asian trading, crude futures dropped below $115 a barrel before rebounding after a militant group in Nigeria reported that it has sabotaged another oil pipeline.
Oil stalled in its march toward $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. Oil pricing has simply gained too much, too fast, and so this profit-taking activity is much deserved,” said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.
Light, sweet crude for June delivery fell 53 cents to $115.53 a barrel in Asian electronic trading on the New York Mercantile Exchange by late afternoon in Singapore. Before news of the pipeline attack, it fell as low as $114.51 a barrel.
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 noted.
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.
In other Nymex trading, heating oil futures fell 1.45 cents to $3.2438 a gallon (3.8 liters) while gasoline prices dropped 2.35 cents to $2.9951 a gallon. Natural gas futures lost 4.7 cents to $10.743 per 1,000 cubic feet. Brent crude futures fell 57 cents to $113.77 a barrel on the ICE Futures exchange in London.
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First Published: Fri, Apr 25 2008. 03 10 PM IST