|Page (1) of 1 - 01/03/12||email article||print page|
Oil drift lower toward $102 in Europe as traders eye improving US economy, Iran tensions
Oil prices retreated toward $102 a barrel Wednesday as investors booked profits following big gains in the previous session when further evidence of an improving U.S. economy emerged and tensions in the Persian Gulf ratcheted higher.
By early afternoon in Europe, benchmark crude for February delivery was down 82 cents at $102.14 a barrel in electronic trading on the New York Mercantile Exchange. The contract jumped $4.13 to settle at $102.96 in New York on Tuesday.
In London, Brent crude was down 73 cents at $111.40 a barrel on the ICE Futures exchange.
Crude has jumped from $75 in October amid evidence the U.S. economy is slowly growing and may avoid recession this year. A closely-watched survey Tuesday found the U.S. manufacturing sector expanded at its fastest rate in six months in December. Separately, figures showed construction spending up by more than anticipated in November as builders spent more on single-family homes, apartments and remodeling projects.
Investors were also cheered by positive economic signs in Germany and China.
"We are seeing some profit taking after (Tuesday's) strong price moves," analysts from Sucden Financial in London said. "There's little direction from the muted tone in European financial markets whilst modest dollar strength is exerting a little pressure."
The euro fell to $1.2985 on Wednesday from $1.3056 late Tuesday in New York. A stronger dollar often weighs on crude by making the commodity a less attractive investment for traders holding other currencies.
Tensions between Iran and Western powers over the Middle Eastern country's nuclear program have supported oil prices in recent weeks too.
On Tuesday, Iran ended 10 days of naval maneuvers and warned the U.S. military to stay out of the Persian Gulf. Iran has threatened to close the key oil passageway Strait of Hormuz as possible retaliation to new U.S. economic sanctions. The U.S. has said it will not tolerate such a move.
"Current global economic activity and oil market fundamentals do not justify today's elevated price levels," said energy analyst Richard Soultanian at NUS Consulting. However, "it's clear that the (Iran) situation will not resolve itself quickly and markets will be driven largely by headline risk and not fundamentals for the foreseeable future."
Investors will also be monitoring fresh information on U.S. stockpiles of crude and refined products.
Data for the week ending Dec. 30 is expected to show a draw of 450,000 barrels in crude oil stocks and a build of 1.5 million barrels in gasoline stocks, according to a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos.
The American Petroleum Institute will release its report on oil stocks later Wednesday, while the report from the Energy Department's Energy Information Administration ' the market benchmark ' will be out on Thursday.
In other Nymex trading, heating oil lost 0.1 cent at $3.0372 per gallon and gasoline futures fell 1.34 cents to little changed at $2.7352 per gallon. Natural gas futures were up 4.6 cents to $3.039 per 1,000 cubic feet.
Alex Kennedy in Singapore contributed to this report.