Crude Oil Drops on Speculation Record Near $120 Was Unjustified

Bloomberg: Crude Oil Drops on Speculation Record Near $120 Was Unjustified

By Grant Smith

April 23 (Bloomberg) — Crude oil declined for the first time in four days on speculation yesterday’s record near $120 a barrel wasn’t justified.

Oil reached $119.90 a barrel yesterday when the U.S. dollar touched an all-time low of $1.6018 to the euro. Unions planning to strike at a 200,000 barrel-a-day refinery in Scotland next week are holding talks with the plant’s owners Ineos Group Holdings Plc today after failing to reach agreement yesterday.

“This morning oil has eased back below $118 a barrel amid profit-taking after crude prices have gained just over 18 percent this month,” said Nimit Khamar, an analyst at Sucden (U.K.) Ltd. in London. Still, the Scottish refinery dispute is “keeping the market on edge.”

Crude oil for June delivery fell as much as 88 cents, or 0.8 percent, to $117.19 a barrel in electronic trading on the New York Mercantile Exchange. The contract traded at $117.30 a barrel at 1:06 p.m. London time.

The May contract, which expired yesterday, rose $1.89, or 1.6 percent, to settle at $119.37 a barrel on Nymex, a record close. Futures earlier reached the highest intraday price since trading began in 1983.

Brent crude for June settlement was at $115.17 a barrel, down 78 cents, on London’s ICE Futures Europe exchange at 1:06 p.m. London time.

The contract gained $1.52, or 1.3 percent, to close at a record $115.95 a barrel yesterday after touching $116.75, an all-time intraday high.

“The weakness of the dollar is a great driver here,” said Francisco Blanch, head of commodities research at Merrill Lynch & Co. in London. “Oil has become a little bit of a monetary phenomenon, where low rates boost demand for oil in emerging markets.”

Forties Pipeline

Workers are planning to strike from April 27 to 28 at Ineos’ Scottish plant, which takes crude from BP Plc’s Forties Pipeline System that transfers oil from more than 50 North Sea fields.

Oil has also gained because of a supply disruption in Nigeria. Royal Dutch Shell Plc closed 169,000 barrels a day of supply after attacks on a pipeline last week.

The U.S. Energy Department is scheduled to release its weekly report on inventories today at 10:30 a.m. in Washington.

Gasoline stockpiles probably declined 2 million barrels in the week ended April 18 from 215.8 million barrels the week before, according a Bloomberg survey. Oil supplies advanced 1.5 million barrels from 313.7 million barrels, according to the median of responses from 15 analysts.

To contact the reporter on this story: Grant Smith in London at [email protected]

Last Updated: April 23, 2008 08:07 EDT

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a9nc.F0idd8g

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