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Oil ends tumultuous week slightly lower

A trader makes his voice heard in the crude oil and natural gas options pit on the floor of the New York Mercantile Exchange in New York on Thursday. PHOTO: AP

Oil prices held near all-time highs on Friday, capping a tumultuous week of surging prices attributed to a sliding US dollar and choppy world stock markets.

New York's main oil contract, light sweet crude for delivery in April, shed US$0.12 to close at US$110.21 per barrel a day after hitting a fresh intraday record of US$111. In London, Brent North Sea crude for April held unchanged at its record close of US$107.54, slipping off record highs earlier in the day of US$108.02.

"The dollar sentiment remains negative. Dollar-denominated commodities are still well-supported by the weaker greenback, making them relatively cheaper for foreign investors," Sucden analyst Andrey Kryuchenkov said.

Alaron Trading analyst Phil Flynn highlighted the impact of the credit crisis.

"This situation with the dollar is a direct result of the fallout of the liquidity crisis and its impact on the world's perception of the US economy," Flynn said.

"The Federal Reserve has cut rates aggressive and that has added to the dollar's woes and in my estimation has been directly responsible for adding at least US$20 or US$30 to the price of oil. Oil prices are treading in dangerous territory as oil and gasoline are being played more as a hedge against the dollar and has little regard for supply and demand," he said.

World share prices have been rocked by persistent concerns that the US subprime, or high-risk, home loan crisis and subsequent credit squeeze could herald a global economic slowdown.

Sentiment was battered afresh on Thursday as news emerged that a troubled investment fund backed by US private equity giant Carlyle had failed.

Investors also turned to commodities for shelter from risks of higher inflation, which also sent gold prices above US$1,000 per ounce for the first time this week.

"Energy markets continue to enjoy their status as an alternative 'safe haven' for those fleeing the ravaged bond and stock markets," MF Global analyst Ed Meir said.

Oil prices have shot up 90 percent over the past year as the market was driven by tight supplies, geopolitical concerns in key producer nations and fierce demand for crude from China and India.

Prices have gained about 9 percent in value since the start of the year, accelerating after the OPEC crude exporters' cartel held output at current levels last week.

On Friday, OPEC left its estimate for growth in world oil demand this year unchanged.

OPEC said that while high oil prices would brake demand in major industrialized countries, the market for crude would be strong elsewhere.

"World oil demand in 2008 is forecast to grow by 1.2 million barrels per day to average 86.97 million bpd, unchanged from our previous" estimate, the organization said in its monthly report for this month.

US authorities on Friday gave the green light for Canadian group TransCanada Corp to build a 3,456km pipeline to transport crude oil from Canada to the US.

"The US Department of State issued a presidential permit to Keystone authorizing the construction, maintenance and operation of facilities at the United States and Canada border to transport crude oil between the two countries," the group said.

TransCanada president and CEO Hal Kvisle said in a statement that construction would begin in the second quarter of this year, to be completed at the end of next year.

The pipeline will be capable of delivering 590,000 barrels per day of crude oil from Hardisty, Alberta, to US Midwest markets at Wood River and Patoka, Illinois, and to Cushing, Oklahoma.
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