Tuesday June 16, 09:21 PM
Oil prices fall after sharp gains
NEW YORK (AFP) - Oil prices ended lower Tuesday in volatile trade that saw a rise of more than two dollars on the back of a weakening dollar and political unrest in key crude producers Iran and Nigeria.
New York's main futures contract, light sweet crude for delivery in July, fell 15 cents from Monday's close to end at 70.47 dollars a barrel.
Prices swayed from a low of 69.80 dollars to 72.77 dollars.
In London, Brent North Sea crude for August remained flat at 70.24 dollars.
The market shot up on a falling US dollar and indications of a US housing recovery but concerns about demand and the possibility that prices at seven-year highs might have risen too rapidly tempered investor interest, analysts said.
Bart Melek of BMO Capital Markets said the market initially responded to the weakening of the dollar and relatively positive US housing data but ultimately succumbed to "continued demand concerns and concerns that the market went up too high, too fast."
Aside from growing prospects of a global recovery, prices have tracked the dollar in recent weeks.
A struggling dollar tends to boost demand for dollar-priced crude as the commodity becomes cheaper for buyers holding stronger currencies.
Prices earlier Tuesday had advanced as the European single currency jumped against the dollar on news that investor confidence in the German economy rose for an eighth month running.
"It is still important to keep watching out for the dollar," said analyst Andrey Kryuchenkov at VTB Capital in London.
"For now ... (the oil market) could remain quiet until Wednesday afternoon when US energy (USEG - news) data is released," he added.
The weekly report on US energy reserves is a key factor because the United States is the biggest-oil consuming nation, followed by China.
Oil prices are recovering from a slump since scaling historic peaks of more than 147 dollars a barrel in July.
Meanwhile unrest in Iran and Nigeria remained focus points for traders, according to Commerzbank (Xetra: 803200 - news) commodities analyst Eugen Weinberg.
"In addition to China's oil appetite, coupled with ... a weaker US dollar, the geopolitical risks are the underlying drivers," Weinberg said.
"Political unrest following the presidential elections in Iran and bombing attacks on oil plants in Nigeria represent an explosive mix for the oil market."
Despite Iran's big spare capacity, "I believe if the situation in Iran turns into a civil war the market will start to care," said Phil Flynn of Alaron Trading.
Iran's election watchdog said on Tuesday it was ready for a recount in the hotly disputed presidential vote as the nation braced for further protests after at least seven people were killed in street battles, according to state media.
The Islamic republic is the second biggest crude oil producer in the Organization of the Petroleum Exporting Countries (OPEC), after Saudi Arabia.
The stage was set for possible further confrontations as President Mahmoud Ahmadinejad's camp and supporters of defeated rival Mir Hossein Mousavi both called for rallies in the biggest outpouring of public anger since the 1979 Islamic revolution.
Meanwhile, tensions remained high in Nigeria after militants in the Niger Delta had on Monday claimed attacks against facilities run by US oil giant Chevron (NYSE: CVX - news) .
The Movement for the Emancipation of the Niger Delta (MEND) also threatened to extend its operations beyond Delta State to others in the oil-rich but volatile southern region.
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