Friday June 12, 09:04 PM
Oil prices bow to profit taking, stronger dollar
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NEW YORK (AFP) - Oil prices succumbed to profit taking and a stronger dollar Friday at the end of a week of gains that saw prices peak above 73 dollars a barrel.
New York's main futures contract, light sweet crude for delivery in July, fell to 72.04 dollars a barrel, a drop of 64 cents from Thursday's close.
In London, Brent North Sea crude for July delivery shed 87 cents to settle at 70.92 dollars a barrel.
"The market probably went up a little bit too quickly and I suspect we see some profit taking," said Bart Melek of BMO Capital Markets.
The New York contract had spiked about five dollars over the past three days, peaking at 73.23 dollars in intraday trade Thursday, its highest level since last October.
On May 1, the price hovered around 50 dollars a barrel.
Ellis Eckland, an independent analyst, noted that a firmer dollar makes dollar-priced oil more expensive for buyers using weaker currencies.
"Basically you can explain the whole move with the stronger dollar and the stock equities off a little bit," he said.
The dollar's recent weakness against most major currencies had supported the oil rally, as had several reports indicating a pickup in weak energy demand.
The market shrugged off an OPEC report suggesting that the worst of the impact from the global economic and financial crisis was past for the oil markets, as it fractionally reduced its demand estimate for 2009.
The Organization of the Petroleum Exporting Countries said in its latest monthly report on Friday that the oil market appeared to be turning a corner amid some signs of stabilization in the global downturn.
"In light of the considerable challenges the world economy and commodity markets, particularly the oil market, have undergone, the worst appears to be behind us," the cartel said, adding, "As the world economy stabilizes, the world oil demand appears to be settling down."
OPEC estimated that demand would contract by 1.62 million barrels per day (bpd) or 1.89 percent in 2009 -- only marginally lower than its prior forecast.
In its May monthly report, OPEC had pencilled in a contraction of 1.57 million bpd or 1.83 percent for 2009.
New York crude had soared above 73 dollars on Thursday after the International Energy Agency (IEA) raised projections for world oil demand by 120,000 barrels per day to 83.3 million in 2009, up from its 83.18 million forecast in May.
On Wednesday, oil prices found support in a US Energy Information Administration report showing US crude inventories had tumbled 4.4 million barrels last week.
That was far more than market expectations of a 700,000-barrel drop and stoked hopes of a recovery in the global economy and energy demand.
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