Wires 24/7

Business

Oil falls in Asia amid concern over price outlook

By KELLY OLSEN Associated Press Writer

Mar 26th, 2009 | SEOUL, South Korea -- Oil prices fell below $54 a barrel in Asia Friday, retreating from a new high for the year, on concerns about the sustainability of recent gains.

Benchmark crude for May delivery fell 55 cents to $53.78 a barrel by midday in Asian electronic trading on the New York Mercantile Exchange.

Oil prices hit a new high for the year Thursday as investors wagered there would be a new run on crude supplies. The contract rose $1.57 to settle at $54.34 a barrel.

But those recent gains have left room for declines amid a volatile outlook, said Victor Shum, an energy analyst at consultancy Purvin & Gertz in Singapore.

"Do expect a bumpy ride in the near term. There could be some selling to take profits," Shum said.

He attributed crude's recent gains to "spillover from the equities market with no change in fundamentals."

Energy prices have been surging despite reports that continue to show the U.S. economy is shrinking and oil inventories are bloated with surplus crude.

Crude in storage last week rose 3.3 million barrels to 356.6 million barrels, according the Energy Information Administration announced Wednesday. The increase was much higher than expected.

Investors, however, have bid up prices on the expectation of a future shortage of oil, analysts including Stephen Schork have said. Schork, in his daily oil report Thursday, called the gains "an aberration" given the state of global demand.

The U.S. economy, the world's biggest oil consumer, shrank at a 6.3 percent pace at the end of 2008, the worst showing in a quarter-century, government data showed Thursday. And in Japan, exports fell by nearly half in February from a year earlier -- a record drop.

Oil prices have gotten support from the advance this month in global stock markets. In New York Thursday, the Dow gained 2.3 percent to reach its highest close in six weeks amid surprisingly good earnings from some major consumer brands. Asian markets were mostly modestly higher Friday.

The strength in oil has also come as the Organization of the Petroleum Exporting countries has been trying for several months to squeeze off crude production in hopes of driving up prices. Members want to cut production by 4.2 million barrels per day.

In other Nymex trading, gasoline for April delivery fell 1.44 cents to $1.5167 a gallon, while heating oil dipped to $1.4743 a gallon. Natural gas for April delivery fell 0.7 cent to $3.940 per 1,000 cubic feet.

In London, Brent prices fell 50 cents to $52.96 a barrel on the ICE Futures exchange.

Salon provides breaking news articles from the Associated Press as a service to its readers, but does not edit the AP articles it publishes.

From Salon's blogs