Oil prices fell to near $78 a barrel Tuesday as traders continued to focus on the dollar’s exchange rate, whose rise makes crude more expensive for international investors.
Prices were also supported by forecasts indicating expanding oil demand in Asia next year, helping to offset a sluggish U.S. economy.
By early afternoon in Europe, benchmark crude for December delivery was down 68 cents to $78.22 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose $2.55 to settle at $78.90 on Monday.
Traders are trying to anticipate the strength of the global economic recovery and how much crude demand may grow during the next 12 months.
The International Energy Agency, which advises 28 member countries on energy policy, expects crude demand to grow next year, led by emerging economies such as China and India while developed countries stagnate.
“OECD demand will be almost flat, so the increase will come mainly from emerging economies, which account for a little less than half of total global demand,” said Nobuo Tanaka, the group’s executive director in an interview in Singapore.
Tanaka warned that if oil prices, which are up from $32 in December, continue to rise, high energy costs could undermine the global recovery.
Some analysts expect stronger demand and a weakening U.S. dollar will help push prices higher.
“I think oil fundamentals will tighten and we’ll retain the bull market,” said Alan Plaugmann, a commodities analyst with Saxo Capital Markets in Singapore.
Plaugmann said he expects crude to reach $100 a barrel during the second or third quarter next year.
On Tuesday, the euro was down to $1.4864 in European trade from $1.4987 in late New York trade on Monday. The British pound fell to $1.6773 from $1.6836 and the dollar rose to 89.29 Japanese yen from 88.98 yen.
“At $80 (a barrel) ... it is difficult based on the idle capacity both in upstream and downstream to be very enthusiastic about any further upside price potential for next year based on fundamentals,” said analyst Olivier Jakob of Petromatrix in Switzerland. “But for now we have to recognize that the main trading input needs to be the correlation to the dollar.”
In other Nymex trading, heating oil fell 0.91 cent to $2.0229 a gallon. Gasoline for December delivery dropped 1.56 cents to $1.9712 a gallon. Natural gas for December delivery lost 3.6 cents to $4.578 per 1,000 cubic feet.
In London, Brent crude for December delivery fell 56 cents to $78.20 on the ICE Futures exchange.
———
Associated Press writer Alex Kennedy in Singapore contributed to this report.
Business
<img src=" http://www.joplinglobeonline.com/images/zope/tuesday.gif" border=0> Oil down to near $78 as dollar rebounds
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