Oil prices slipped below US$75 a barrel on Friday as supply concerns eased, after a storm in the Caribbean weakened and appeared to no longer threaten Gulf coast oil facilities.
Prices remained high, though, and are subject to big swings as traders monitor various factors that could affect supply, such as the potential for storms in the Gulf, record temperatures throughout the US, violence in the oil-rich Middle East and political strife in Nigeria, Africa's biggest oil producer.
Also keeping crude above the US$70-a-barrel level is strong energy demand in the US and other countries, especially China, despite soaring prices. The Energy Department said in its weekly petroleum report on Wednesday that US gasoline demand is still above year-ago levels.
Light sweet crude for delivery next month dropped US$0.70 to settle at US$74.76 a barrel Friday on the New York Mercantile Exchange. The contract is still up about 2 percent on the week.
September Brent crude drop-ped US$0.39 to settle at US$76.17 a barrel on London's ICE Futures exchange.
Nymex gasoline futures fell US$0.0612 to settle at US$2.2315 a gallon and heating oil dropped US$0.0239 to settle at US$2.0896 a gallon.
Still, US drivers were paying on average more than US$3 for a gallon of regular unleaded gasoline on Friday, AAA said.
Recent rises in energy futures prices had largely been driven by fears that Tropical Storm Chris could become the first major hurricane of the season and damage or disable Gulf Oil facilities. But the storm weakened on Friday as it swept through the eastern Caribbean.
Analysts noted, however, that the markets would monitor the storm into the weekend in case of any change in status.
In other Nymex trading on Friday, natural gas fell US$0.046 to settle at US$7.246 per 1,000 cubic feet after the release of natural gas inventory figures for last week.
The Energy Department reported on Thursday that natural gas in underground storage for the week ending July 28 rose 19 billion cubic feet from the previous week to 2,775 billion cubic feet. Stocks were well above the 5-year average of 2,328 billion cubic feet.
Natural gas futures soared well above US$8 earlier in the week as searing heat in some parts of the US put pressure on electricity grids, forcing utility companies to use more natural gas to meet demand.
Natural gas is especially susceptible to weather, said Oppenheimer & Co analyst Fadel Gheit, because it cannot be imported as easily as crude oil, and thus the country depends almost exclusively on its own production and underground storage.
Natural gas prices have climbed by about 50 percent over the past five months, but they are still well below their all-time high above US$14 per 1,000 cubic feet reached last October, in the wake of hurricanes Katrina and Rita.
Gheit said it's improbable that natural gas will reach those heights anytime soon unless the Gulf Coast -- which accounts for about a quarter of US natural gas production and about 10 percent of US oil production -- is struck by huge storms like last year. He expects natural gas futures will be trading above US$10 per 1,000 cubic feet by December.
Meanwhile, Iran's deputy oil minister, on a visit to India, said international crude oil prices could hit US$100 a barrel, driven by political upheaval and an expected winter spike in demand, Dow Jones Newswires reported.