Oil Falls Below $75 On Weak Demand, Strong Dollar

Oil prices continued to slide last Friday, with crude following the stock market lower as investors were disappointed that United States’ jobless claims did not fall as much as expected in a weekly report from the Labour Department.

Lower prices were also seen to be caused by the strong dollar, which makes dollar-priced crude more expensive for investors holding other currencies.

Benchmark crude for June delivery dropped $1 to $74.65 a barrel in midday trading on the New York Mercantile Exchange. Prices have dropped nearly 15 per cent in the last 10 days.

The euro fell to $1.2553 in New York morning trading from $1.2631 late Wednesday, while the British pound was down to $1.4712 from $1.4821.

“Investors are expected to keep an eye on the US dollar/euro movements … considered to be the main drivers of current crude oil prices in the near term, as volatility still dominates the energy market due to the European economic uncertainty,” said a report from Sucden Financial in London.

In the US, crude inventories have been rising, defying analysts’ predictions that a recovering economy would boost demand.

The US Energy Information Administration said that oil supplies increased more than expected last week as stockpiles grow for 14 of the last 15 weeks.

Supplies at the key Cushing, Oklahoma, terminal jumped to a record high.

The Paris-based International Energy Agency said that global oil demand this year was expected to rise 220,000 barrels a day less than it previously forecast.

Investors are looking to surging demand from developing countries, such as China and India, to bolster oil prices.

Oil prices have yet to be affected by the giant spill in the Gulf of Mexico, though there is worry that the spill may eventually interfere with tankers carrying imported oil to Gulf ports and vessels moving refined products to other parts of the country.

The well’s owner, BP PLC, has said that its costs for trying to stop the gusher, containing the spill and helping Gulf states foot the response tab totalled $450 million, up $100 million since its Monday update to securities regulators. The spill started after an oil rig exploded and sank on April 20.

In other Nymex trading in June contracts, heating oil fell 1.05 cents to $2.1486 a gallon, gasoline lost 0.95 cent at $2.2009 a gallon.

In London, Brent crude was down 69 cents to $80.51 on the ICE futures exchange.

Nelson Chukwudi, with agency reports