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Oil temporarily drops as dollar gains { April 24 2008 } Original Source Link: (May no longer be active)
http://ap.google.com/article/ALeqM5i5TtajgUpSm7KY5jf-lCJGHBB-tAD9089FHO1http://ap.google.com/article/ALeqM5i5TtajgUpSm7KY5jf-lCJGHBB-tAD9089FHO1
Oil drops below $117 a barrel as dollar gains
By GEORGE JAHN
April 24, 2008
VIENNA, Austria (AP) — Oil prices dropped Thursday on the back of a strengthening American dollar and a U.S. government report showing an increase in crude supplies. Oil products prices also fell.
The dollar was higher in European trading, after taking back some ground against the euro Wednesday. A stronger dollar makes commodities such as oil less attractive as a hedge against inflation and makes oil more expensive to investors overseas. The weakness of the dollar compared to the first-half of last year has been a primary factor to crude oil's sharp rise in recent months.
"The recovery in the U.S. dollar weighs on oil prices," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.
Light, sweet crude for June delivery on the New York Mercantile Exchange fell $1.64 to $116.66 a barrel in electronic trading by afternoon in Europe. The contract settled at $118.30 a barrel Wednesday.
The U.S. Energy Department's Energy Information Administration reported Wednesday that crude stockpiles grew 2.4 million barrels last week — more than double what analysts expected.
"Despite the uptick in refinery demand, crude oil, stocks increased for the first time in three reports," said Stephen Schork in his Schork Report. Still he noted further support for prices in the short term due to an increased "risk factor regarding future supply."
Feeding those concerns, about 170,000 barrels a day of Nigerian production remained shut-in following a pipeline attack earlier this week. BP PLC is also considering shutting down its 700,000 barrel-a-day Forties pipeline system if a strike continues at a U.K. refinery.
The EIA also reported that gasoline stocks fell 3.2 million barrels last week, about a million barrels more than expected. Gasoline supplies have been falling lately, raising concerns about stockpile levels as the Northern Hemisphere summer driving season approaches.
Those concerns about motor fuel supply are exacerbated by the possible shut-in of BP's Forties pipeline system. Both the North Sea and Nigeria produce oil that is low in sulfur and other impurities, which makes it ideal for gasoline production. Prospects that gasoline output may fall further just ahead of peak demand have led some analysts to believe that gasoline prices will drive the oil spectrum higher.
But Shum noted also that gasoline inventories remain above the five-year average for this time of the year, despite the decline.
"Even though the gasoline inventory dropped sharply, the inventory at this time of the year in the U.S. is at the top end of the range despite several weeks of declines," he said. "The overall level of gasoline stocks is at a healthy level and so there should not be any concern about tightness in supply."
Stockpiles of distillates, which include heating oil and diesel, fell 1.4 million barrels, more than four times the expected level.
Heating oil futures slid by more than 4 cents to $3.328 a gallon while gasoline prices fell more than 5 cents to $2.9995 a gallon. Natural gas futures plunged by more than 10 cents to $10.674 per 1,000 cubic feet.
Brent crude futures slipped by $1.03 to $115.43 a barrel on the ICE Futures exchange in London.
Associated Press Writer Gillian Wong contributed to this report from Singapore.
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