Oil prices dip to $127 a barrel in Asian trading

• IBTimes RSS
• Print
• E-Mail
• digg
• Del.icio.us

Oil prices have fallen back sharply over the last week after climbing above $135 a barrel on May 22. Prices edged higher on Monday on concerns about heating oil supplies and after an OPEC official said there is no need for the cartel to pump more oil.

"Typically a seesaw pattern is an indication that the market has peaked," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore. "But some see this as an opportunity to buy. Global demand remains tight and supply remains restrained."

Midday in Singapore, light, sweet crude for July delivery was down 46 cents to $127.30 a barrel in electronic trading on the New York Mercantile Exchange. On Monday, the contract rose 41 cents to settle at $127.76.

Investors were digesting reports that Iran's top Organization of Petroleum Exporting Countries official said there is no need for a special OPEC meeting to discuss raising output, said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.

Flynn said oil futures rose Monday rose in sympathy with natural gas futures, which soared as high temperatures in many parts of the U.S. raised demand from utilities that use natural gas to generate electricity for home cooling. July natural gas futures were up 9.6 cents in Asian trading to $12.065 per 1,000 cubic feet.

Shum said the oil market remains "structurally tight," meaning that global demand continues to grow despite an economic slowdown in the U.S. the world's top oil consumer while supplies remain constrained.

"OPEC supply has failed to meet expectations. There's not a great deal of spare capacity in OPEC," he said.

Some traders took heart by the slight improvement in a key U.S. indicator in the manufacturing sector released overnight, easing some concerns that soaring oil prices were crushing manufacturers, Shum said.

The Institute for Supply Management's index of manufacturing activity edged up to 49.6 in May compared to an April reading of 48.6. However, the reading remained just below a reading of 50, the dividing point which indicates whether manufacturing is in a recession.

• 1
• 2