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THE NEW YORK TIMES: Oil Falls Toward $68 as Metals Slide

Oil Falls Toward $68 as Metals Slide

By REUTERS
Published: May 19, 2006

Filed at 11:20 a.m. ET

LONDON (Reuters) – Oil fell by more than a dollar toward $68 a barrel on Friday, close to a five-week low, as renewed concern about rising inflation and slower economic growth prompted selling across commodity markets.

The drop in crude came alongside a slide in prices of industrial and precious metals, which have hit record or near-record highs in the past month. Copper fell over 6 percent and aluminum, zinc and gold also slid.

“Oil is moving in sympathy with other commodities,'' said Alexander Kervinio, analyst at SG CIB Commodities in Paris. ''People are still worried about inflation, and we don't have anything new to push oil higher.''

U.S. crude (CLc1) was trading $1.25 lower at $68.10 a barrel by 1450 GMT, while London Brent (LCOc1) fell $1.14 to $68.53. U.S. crude fell to $67.85 on Thursday, the lowest since April 10, before rallying by the close of trade.

Oil's drop this week has coincided with a sell-off in commodities, stocks and bond markets. But analysts say worries about supply cuts in Nigeria and possible disruption of oil flows from Iran will limit selling.

“The medium-term picture still looks pretty bullish to us. The mid-60s is about as low as it will go,'' said Kevin Norrish, an analyst at Barclays Capital.

OPEC's acting secretary-general Mohammed Barkindo said on Friday oil prices would not fall until anxiety over global political tensions eased.

“Prices will not fall until this anxiety abates,'' he said at the start of an Oslo workshop attended by officials of the Organization of the Petroleum Exporting Countries and the International Energy Agency, adviser to industrialized nations.

'NO DEMAND UNMET'

OPEC is pumping close to full tilt, and analysts say the cartel is unlikely to change its formal supply limit when minters next meet in Caracas on June 1.

Also speaking in Oslo, Iran's OPEC governor Hossein Kazempour Ardebili said fundamentals suggested the group should cut output by up to 1.2 million barrels per day, but it would probably decide in June to keep production unchanged.

“There is no demand unmet and no call on OPEC oil beyond its capacity,'' he added.

OPEC has been pumping more or less flat out for over a year, though militant attacks in OPEC producer Nigeria have cut back production there by around a quarter.

Together with fears output from Iran could be disrupted as a result of its dispute with the West over its nuclear ambitions, the Nigerian production loss helped to push prices to a record of $75.35 for U.S. crude in April.

Iranian President Mahmoud Ahmadinejad on Thursday derided foes of Iran's nuclear work as mentally disturbed, ignoring a fresh plea by U.N. Secretary-General Kofi Annan for all sides in the dispute to calm their rhetoric.

Tehran insists its nuclear program is peaceful, but Western countries fear it could be developing atomic bombs.

Nigerian activists have given Royal Dutch Shellpromising signals over a possible return to oilfields it was forced to abandon after a series of militant raids three months ago, but Shell has lost 455,000 bpd of output since February.

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