Sun | Dec 11, 2016

Oil settles below US$106 per barrel

Published:Friday | March 25, 2011 | 12:00 AM

After government reports gave a mixed read on the United States economic recovery, oil prices on Thursday settled close to where they began.

The Commerce Department said companies trimmed orders for manufactured goods in February, suggesting that businesses were limiting spending. Meanwhile, the US Labour Department said fewer people applied for unemployment benefits last week, indicating that employers could be expanding their workforces.

Benchmark crude prices fluctuated as traders digested the news, rising as high as US$106.69 a barrel before dropping back.

The contract for May delivery fell 15 cents to settle at US$105.60 per barrel on the New York Mercantile Exchange.

Prices have jumped 24 per cent since the middle of February, when rebellion broke out in Libya and eventually squeezed off production that supplied nearly 2 per cent of the world's oil.

In London, Brent crude gained 13 cents to settle at US$115.60 per barrel on the ICE Futures exchange.

As fighting continues in Libya, companies like Occidental Petroleum Corp and Austria-based OMV, were removing workers in Yemen, where anti-government protests have been intensifying.

Yemen produces only 0.3 per cent of the world's oil, according to the International Energy Administration, but it is located on one of the world's most strategic shipping lanes.

About 3.2 million barrels of oil per day - more than twice what Libya produced - pass through a strait near Yemen that connects the Red Sea with the Gulf of Aden.

The Energy Information Administration has said that disruptions in that shipping lane would force oil tankers to take a costly detour around the southern tip of Africa to reach western markets.

The world is still flush with surplus oil, yet traders say the fighting in North Africa and the Middle East, combined with the Japanese nuclear crisis, could make it difficult for oil producers to keep up with rising demand.

PFGBest analyst Phil Flynn estimates that world oil demand will rise by one to two million barrels per day as Japan replaces power lost from its damaged nuclear reactors, and other countries like Germany take aging nuclear facilities offline.

Analysts are concerned that rising fuel prices could impact business and consumer spending, which would slow economic recovery.

"People are nervous about a correction that will inevitably come," Flynn said. "So, at the first sign of bad news, they sell, and when it doesn't fall that much, they jump back in."

Natural gas prices fell after the government reported that US supplies dropped by six billion cubic feet, but remain above the five-year average. The contract for April delivery lost 9.1 cents to settle at US$4.244 per 1,000 cubic feet. Prices had increased about 13 per cent since March 10.

After the Energy Information Administration's report fell within analysts' expectations, traders sold to lock in profits, analyst Stephen Schork said.

In other Nymex trading for April contracts, heating oil added nearly a penny to settle at US$3.0787 a gallon and gasolene futures rose 2.22 cents to settle at US$3.0508 per gallon.

- AP