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Oil rises, but back off day's high PDF Print E-mail
Wednesday, 16 July 2008

VIENNA, Austria (AP) -- Oil prices rose Tuesday but were below the day's highs as supply worries kept a firm floor under prices.

''The oil market right now is fundamentally tight, which is why prices have been high and volatile,'' said David Moore, a commodity strategist with Commonwealth Bank of Australia in Sydney.
Light sweet crude for August delivery was up 50 cents at $145.68 a barrel by afternoon in Europe in electronic trading on the New York Mercantile Exchange. Earlier, oil had traded above $146 a barrel.
The contract rose 10 cents in Monday's floor session to close at $145.18 a barrel, just over a dime short of the all-time settlement high. It has traded as high as $147.27 a barrel, a record set last week.
Most consumers in the major consuming countries feel the bite of pricey oil at the pump. In a research note, analyst and trader Stephen Schork wrote that although U.S. gasoline and diesel prices decreased marginally last week they ''still averaged 79.9 cents (30 percent) above last year's pace.''
''As a result, the year to-date average is now more than 50 percent, or $1.348 a gallon,bove last year's pace,'' he wrote.
Threats to supply in Brazil, Iran and Nigeria have been keeping oil near the record levels hit last week.
A five-day strike by Brazilian oil workers that began early Monday has cut the production of Petroleo Brasileiro SA, or Petrobras by about 4 percent, according to the state-run oil company. Oil workers are striking at 33 rigs in a dispute over pay but only two rigs were totally stopped, Petrobras said.
Petrobras produces about 1.6 million barrels of oil a day. It is estimated to be the world's sixth largest oil company in terms of market capitalization.
Also, tensions remain between Iran and the U.S. and Israel over what the two allies say are Tehran's suspicious nuclear programs. Investors worry that any worsening of the standoff has the potential to disrupt shipments from OPEC's second-largest oil exporter.
Still, some analysts say they expect an easing of pricing later in the second half of the year.
Oil prices that have doubled in the past year have begun to weaken demand, said Moore.
''We've started to see weaker demand in the U.S., but we don't expect this to help lower prices until the fourth quarter,'' he said. He expects the price of oil to average about US$143 in the third quarter and about US$137 in the fourth.
Also, a weakening of the dollar helped to support commodity prices Tuesday. Many investors view oil and other commodities as hedges against inflation and a weakening dollar, and their prices tend to rise as the currency declines.
The dollar fell to 105.79 yen in Asian currency trade, while the euro rose to an all-time high of $1.6038 in European trading, before settling back at $1.5983.
On Monday, President Bush lifted an executive ban on offshore oil drilling. That alone is not expected to loosen global supplies in the short term since a Congressional prohibition remains in place and any new wells would take years to complete.
August Brent crude rose $1.44 to $145.36 a barrel on the ICE Futures exchange in London.
In other Nymex trade, heating oil futures rose almost 4 cents to $4.1046 a gallon while gasoline prices gained nearly 2 cents to $3.5750 a gallon. Natural gas futures rose just over 10 cents to $12.064 per 1,000 cubic feet.

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