Oil back down below $120
Sunday, 24 August 2008

A strengthening dollar helped push down oil below $120 a barrel Friday after a nearly $6 spike the day before, reports AP.

Heightened fears of an extended and bloody fight between Russia and neighboring Georgia, however, provided continued support to oil prices.
 
Light, sweet crude for October delivery had shed $1.43 to $119.75 a barrel on the New York Mercantile Exchange. The contract rose $5.62 overnight to settle at $121.18 a barrel.
 
In London, October Brent crude fell $1.38 to $118.78 a barrel on the ICE Futures exchange.
 
''It's still speculative whether Russia will use oil as a weapon to punish the West,'' said Victor Shum, an energy analyst with Purvin & Gertz in Singapore. ''But it has certainly focused the market on that geopolitical threat.''
 
The United States and Poland signed a deal Wednesday to place a U.S. missile defense base just 115 miles from Russia's westernmost border a provocative move that was immediately denounced by Moscow.
 
Russia's Foreign Ministry warned that Moscow's response to further development of the missile defense shield would go beyond diplomacy.
 
U.S. Secretary of State Condoleezza Rice has dismissed any suggestion that the missile defense interceptors to be based in Poland constitute a threat to Russia. Washington insists the base is intended only as a defense against long-distance missiles from Iran.
 
Russian forces strengthened positions deep in the interior of Georgia on Thursday, digging trenches and setting up mortars a day before Kremlin officials promised to complete a troop withdrawal from the former Soviet republic. A top Russian general said it could be 10 days before the bulk of the troops left, but troop movements in Georgia have repeatedly overshadowed departure timetables set by the Kremlin.
 
Western leaders remained adamant that Russia remove its troops and do it quickly.
 
Sen. Joe Lieberman said he wants to see Russia removed of the Group of Eight ''for a while'' and denied entry into the World Trade Organization as punishment for its actions in Georgia.
 
''The Russian-Georgia conflict has disrupted supplies and it looks like it will drag on and create a lot of uncertainty,'' Shum said.
 
London-based BP PLC last week shut down its Baku-Supsa oil pipeline -- which runs through the center of Georgia from Baku in Azerbaijan to Supsa on Georgia's Black Sea coast -- because of security concerns.
 
The line, which has a 150,000-barrel-a-day capacity, had recently been pumping around 90,000 barrels a day, according to a BP spokeswoman.
 
The British oil company also said that testing was to begin Wednesday on the closed Baku-Tbilisi-Ceyhan oil pipeline -- which runs through Georgia as well -- ahead of a move to restart full operations as early as next week.
 
That line, owned by a consortium of energy companies led by BP, has been closed for more than two weeks after a fire on its Turkish stretch. Kurdish rebels have taken responsibility for that blaze.
 
Friday's strengthening of the U.S. dollar against other major currencies helped soften oil prices. Investors tend to put money into commodities like oil to hedge against inflation and dollar weakness. A stronger greenback usually is coupled with lower oil prices.
 
On Friday, the euro lost ground to the dollar, trading at $1.4810, down from $1.4877 late Thursday in New York, while the American currency rose to 109.82 Japanese yen, from 108.65 yen in the previous session.
 
In other Nymex trading, heating oil futures fell 3.26 cents to $3.2680 a gallon, while gasoline prices lost 4.22 cents to $3.003 a gallon. Natural gas futures shed 8.5 cents to $8.167 per 1,000 cubic feet.

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