Oil futures seesawed broadly on Friday and finished up modestly as investors tried to determine whether recent price declines were temporary.
Overnight, light, sweet crude for July delivery fell below US$125 a barrel before rebounding to settle up US$0.73 at US$127.35 on the New York Mercantile Exchange. On Thursday, prices fell US$4.41, the biggest single-day price drop since March 19.
In London, July Brent crude rose US$0.89 to settle at US$127.78 a barrel on the ICE Futures Exchange.
High prices are cutting demand for gasoline; data from the US Energy Department and Federal Highway Administration and several surveys in recent days suggest US consumers are driving less. Jitters about falling demand have helped send oil prices sharply lower since they set a new record over US$135 a barrel last week.
Friday’s price uncertainty reflected a ongoing battle in the oil market between investors who feel prices have risen too far, and those who think global demand and tight supplies justify prices above US$130 — or even US$140.
“A US$4 drop just really looks like a buying opportunity to some people,” said Brad Samples, an analyst at Summit Energy Services Inc in Louisville, Kentucky.
PHOTO: AP
Andy Lebow, senior vice president at MF Global LLC in New York, said investors are uncertain whether the past week’s nearly US$10 price decline is a correction in a bull market, or a sign that the bull market has run its course.
Additional selling pressure came from a Commodity Futures Trading Commission (CFTC) investigation into possible price manipulation in oil futures markets. The CFTC also announced new rules designed to increase transparency of US and international energy futures markets.
But the dollar, which fell against the euro and British pound, gave investors reason to buy. Many investors buy commodities such as oil as a hedge against inflation when the greenback weakens. Also, a lower dollar makes oil less expensive to investors overseas.
If oil prices fall, US gasoline prices will eventually follow, analysts say. At the moment, there may be too much momentum left over from oil’s sharp rise in recent weeks to stop gasoline prices from hitting US$4 a gallon (US$1.05 a liter).
On the NYMEX, gasoline futures for June delivery rose to a trading record of US$3.52 on Thursday; on Friday, the contract rose US$0.0047 to settle at US$3.4089 a gallon.
The June gasoline contract expired at the end of trading on Friday; trading in expiring contracts is often volatile.
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