Oil held above $122 a barrel Thursday in Asia after dropping more than $2 overnight on worries about declining demand in the U.S. and abroad.
In its weekly inventory report, the U.S. Energy Department’s Energy Information Administration said American demand for gasoline dipped 1.4 percent over the last four weeks.
India announced increases that, for example, would boost gasoline prices in New Delhi by 11 percent. Malaysia said it would hike gasoline prices by 41 percent and electricity for commercial and industrial users by 26 percent.
Indonesia and Taiwan, among others, have taken similar steps in recent weeks.
Midafternoon in Singapore, light, sweet crude for July delivery was up 44 cents at $122.74 barrel in electronic trade on the New York Mercantile Exchange. The contract fell $2.01 in the floor session to settle at $122.30 a barrel.
Many analysts have long questioned whether high oil prices could be sustained; many blame speculative investing fueled by the falling dollar for a near doubling of crude prices over the past year.
A weakening dollar can spur investors to buy oil and other commodities as a hedge against inflation, but the effect tends to reverse when the dollar strengthens. A stronger dollar also makes oil more expensive to buyers dealing in other currencies.
Recently, with some fluctuations, the dollar has been gaining against the euro and yen as U.S. economic data supports the view that the Federal Reserve isn’t likely to cut its key interest rate further. In Asian currency trade later afternoon in Tokyo, the dollar was above 106 yen, while the euro was changing hands around $1.54.
Among other main factors cited for sustained high prices over the past year is the unexpected declines in production from some of the world’s key exporters, particularly Russia, Venezuela and Mexico.
In other Nymex trading in Asian hours, heating oil futures rose 1.53 cents to $3.5611 a gallon while gasoline prices dropped 0.61 cent to $3.189 a gallon. Natural gas futures rose 1.2 cents to $12.391 per 1,000 cubic feet.
The July natural gas futures rose 15.8 cents to settle at $12.379 on Wednesday, again boosted by forecasts for hot temperatures in parts of the U.S. this weekend. That would boost demand from utilities for electricity generation to cool homes and businesses.
In London, July Brent crude futures rose 52 cents to $122.62 a barrel on the ICE Futures exchange.
U.S. stocks slid on Monday as a surge in oil prices and a possible rate increase by the Federal Reserve on Tuesday raised concerns consumer spending will slow, hindering profit growth in the third quarter.
Shares of transport stocks like United Parcel Service and FedEx Corp. were particularly hard hit, reflecting concerns about the impact of higher crude oil and gasoline prices on shipping costs and corporate profits. UPS shares fell 2.5 per cent to $67.26 and FedEx dropped 2.8 per cent to $77.93.
“There was no demand for stocks with all the uncertainty regarding oil prices and the Fed meeting tomorrow,” said Matthew Kelon, a fund manager at the Kelmoore Strategy Funds in Palo Alto, California. “It was not a surprise to see stocks heading down.”
The US currency typically moves in the opposite direction of oil and gold prices, while the steep cost of crude was also seen prompting Middle East producers to shift some of the dollar-based windfall into other currencies. The dollar edged up to 104.99 yen up from near 104.75 yen in late US trade. The euro slipped to $1.5475!
Chinmoy Kanjilal is the geek behind Techarraz. This is where he rants about his adventures with technology. Get to know him better, and connect with him on social networks.
gr8 artcle…lets wait n watch the inflationary outcome of this…n lets hope that the public sector utilites will not pass on the burden to the citizens immediately.
newaz, gr8 job highlightin the important stuff.
Not only this, it is supposed to go to $200 in the next two years, and inflation is expected to go up by 1%, already up by 0.5%- total of 1.5%!!!