Oil prices fell to near $78 a barrel Tuesday as the dollar recovered against the British pound and the yen. Expectations of falling U.S. stockpiles and gains on stock markets helped contain the retreat.
By early afternoon in Europe, benchmark crude for February delivery was down 37 cents to $78.40 a barrel in electronic trading on the New York Mercantile Exchange. Earlier in the session, the contract touched a high of $79.01.
The contract settled up 72 cents at $78.77 on Monday after surging above $79 as an extended cold snap in the U.S. triggered an end-of-year rally in energy futures.
Futures contracts for oil, natural gas and heating oil have all become more expensive this month as snow storms blanketed parts of the U.S. and a sharp drop in supplies of crude and other fuels surprised traders.
Analysts say oil could rise above $80 before the end of the year if U.S. inventories later this week show a drop in stockpiles, which would suggest improving demand in the world’s largest economy. It would be the fourth consecutive week decline in U.S. inventories.
Some analysts, however, said that the end-of-year thin trading was distorting the market.
“We continue to be of the opinion that real driver of the oil market last week and this week is the lack of trading volume in the futures market and not really the lack of oil supplies,” said Olivier Jakob of Petromatrix in Switzerland. “We do not want to draw hard conclusions on the balance of the oil markets in such a holiday environment.”
In other Nymex trading in January contracts, heating oil rose 0.30 cent to $2.0765 gallon while gasoline fell 0.35 cent to $2.0149 a gallon. Natural gas fell 3.1 cents to $5.959 per 1,000 cubic feet.
In London, Brent crude for February delivery fell 43 cents to $76.89 a barrel on the ICE Futures exchange. (AP)
