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Oil benchmarks decline on value of the US dollar

Oil prices gave up early gains and headed lower in late trading in London on Friday, in step with New York, on technical factors and a rebound in the value of the dollar, traders said.

The price of benchmark Brent North Sea crude oil for April delivery dropped US$0.20 per barrel to US$30.62 in late trading here.

New York's benchmark light sweet crude March contract lost US$0.43 to US$35.57 in early deals.

The contract, also known as West Texas Intermediate (WTI), was due to expire at the end of the week.

"There is weakness in the market due to the WTI March expiry," said GNI trader Keith Pascall.

People in the market were taking profits ahead of the weekend.

"After the strength of oil prices seen earlier in the week, people are going out and squaring their positions," he said.

A bounce back by the dollar, which hit a new all-time low against the euro on Wednesday, was also weighing on oil, making it less attractive to many buyers because the commodity is priced in the US currency.

"Oil prices are lower because of two things: the March WTI expiry today and the strength of the dollar," said Commerzbank analyst Jon Rigby.

But prices were still finding some support from concerns about the low levels of heating oil and gasoline inventories, highlighted by recent stock estimates, traders said.

The US Energy Department estimated gasoline stocks rose by 600,000 barrels to 205 million in the week to Feb. 13 in its weekly report, published Thursday.

But the American Petroleum Institute, a private trading association, reported a fall of 1.67 million barrels to 202.18 million.

Traders are growing nervous about whether there will be sufficient supplies of gasoline for the northern hemisphere summer when American motorists flock to the roads for the so-called summer driving season.

"Despite high levels of refinery output, inventory of gasoline is failing to climb quickly enough to ease concerns about supply shortages come the onset of the peak demand season in May," said Kevin Norrish, analyst at Barclays Capital.

"Furthermore heating oil inventory is falling very fast indeed and another burst of cold weather could tighten this market a lot," he added.

Supply worries have increased since the OPEC announced plans last week to cut oil output by a total of about 10 percent by April 1.
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