Oil Falls on Economic Report

VIENNA, Austria (AP) -- Oil prices fell Friday on word that a key Iraqi oil pipeline will likely be repaired later in the day and a new report that paints a dour picture for the U.S. economy.

The Commerce Department said consumer spending edged up by just 0.1 percent last month, the poorest showing since September 2006. Economists said the sustained weakness is one of the most worrisome signs that the economy could be tipping into a recession.

Iraqi oil officials had said that a pipeline bombing Thursday in the southern oil city of Basra would not cut oil exports. But Dow Jones Newswires reported that exports from southern Iraqi terminals have been reduced to about 1.2 million barrels a day from a normal rate of 1.56 million barrels a day, and analysts said the full impact of the attack on Iraq's oil exports was not yet known.

"There has been limited reporting on the extent and severity of the damage ... it's still a little bit unclear exactly how much damage was done," said David Moore, a commodity strategist at the Commonwealth Bank of Australia in Sydney.

Still traders appeared to have factored in any losses from Basra by afternoon in Europe, with light, sweet crude for May delivery losing 82 cents to fetch $106.76 a barrel on the New York Mercantile Exchange.

The contract rose $1.68 to settle at $107.58 a barrel on Thursday.

The attack was the second bombing of a pipeline in a week in Basra, where Iraqi security forces have been clashing with Shiite militia fighters. Experts said the ongoing violence, while escalating rapidly, was not expected to result in huge disruptions to Iraqi oil exports.

"The government's and the U.S. forces' ability to keep insurgents from penetrating the actual oil fields and damaging production facilities has not been rocked, although the current level of violence appears to be the highest ever since the 2003 U.S.-led invasion," wrote Samuel Ciszuk of consulting firm Global Insight in a research note.

However, Ciszuk added, "temporary shut-ins of 100-200,000 (barrels a day) should not be ruled out in the coming week."

The news from Iraq added to supply concerns stoked Wednesday when a U.S. government agency reported that domestic crude oil inventories were mostly unchanged last week, while fuel supplies fell more than expected.

"Wednesdays DOE report and Thursdays headline out of Basra helped ignite the crude and heating oil pits," noted Stephen Schork, in his daily Schork Report.

The dollar was mixed in trading Friday, but analysts, though, expect the dollar to resume its decline against foreign currencies because the Federal Reserve is expected to cut interest rates several more times this year.

A stronger dollar makes hard assets such as energy commodities less attractive than when the greenback is falling. Oil futures are priced in dollars, making them more expensive to investors overseas when the greenback rises.

In other Nymex trading, heating oil futures dropped by more than 2 cents to $3.127 a gallon (3.8 liters) while gasoline futures fell by half a penny to $2.721 a gallon. Natural gas futures were up nearly 5 cents at $9.735 per 1,000 cubic feet.

Brent crude futures slipped by 57 cents to $104.43 a barrel on the ICE Futures exchange in London.

631 SW Commerce Pl. Topeka, Kansas 66615 phone: 785-272-6397 fax: 785-272-1363 email: feedback@wibw.com
Copyright © 2002-2016 - Designed by Gray Digital Media - Powered by Clickability 17083596 - wibw.com/a?a=17083596
Gray Television, Inc.