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SINGAPORE, April 25, 2008 (AFP) - World oil prices, which had threatened to break the symbolic 120-dollar-a-barrel level, fell further Friday after a strengthening US dollar and rising US crude stockpiles prompted traders to lock in profits, dealers said.


In afternoon trade, New York's main oil futures contract, light sweet crude for delivery in June, dropped 32 cents to 115.74 dollars per barrel.

The benchmark contract closed down 2.24 dollars at 116.06 dollars a barrel during floor trading on Thursday at the New York Mercantile Exchange.

The May contract had struck a record high of 119.90 dollars before expiring on Tuesday.

Brent North Sea crude for June delivery fell nine cents to 114.25 dollars a barrel, after settling 2.12 dollars lower at 114.34 dollars a barrel on Thursday in London.

It had earlier hit a record intraday peak of 116.87 dollars.

"Dollar gains against the euro continue to weigh on crude and other commodities, and so the trading relationship between the US dollar and movement in oil pricing continues," said Victor Shum, senior principal at Purvin and Gertz energy consultancy in Singapore.

"Profit-taking will continue today, with the Fed expected to make a cut in interest rates next week."

Shum added oil prices will find support at the 115-dollar level.

In the foreign exchange market on Thursday, the dollar gained in value against the euro amid speculation the US Federal Reserve soon might end its campaign of cutting interest rates.

The single European currency traded at 1.5694 dollars on Friday, three days after it had crossed 1.60 dollars for the first time.

"It seems that a larger-than-expected increase in US crude inventories during last week and a stronger dollar were good excuses for some investors to book profits," Sucden analyst Andrey Kryuchenkov said.

A stronger US currency makes dollar-priced crude more expensive for foreign buyers, tending to discourage demand.

Tony Nunan, of Mitsubishi Corp's international petroleum business in Tokyo, said the dollar "might be near the end of its fall".

A weekly United States Department of Energy report on energy stockpiles, released on Wednesday, showed US crude reserves rose 2.4 million barrels the previous week, beating market expectations for a 1.5-million-barrel gain.

Most analysts expect the Fed to lower its key interest rate by a quarter point at its policy-setting meeting next Tuesday and Wednesday.

Before their sharp fall, oil prices had broken a series of records over the past two weeks, sparking international concern. Prices were boosted by the weaker US dollar, supply worries and the OPEC cartel's reluctance to increase output, dealers said.

Shum said that despite the pullback in prices, bulls still dominate the oil market.

"Oil pricing is simply taking a slight hit from the rise in the dollar," said Shum.

A Canadian bank report said on Thursday that the price of oil is likely to hit 150 dollars a barrel by 2010 and 225 dollars a barrel by 2012 as supply becomes increasingly tight.

The CIBC report added that an expected drop in demand in the United States due to higher prices and a weak economy will be more than offset by demand growth in developing nations.


Source: http://sg.news.yahoo.com/afp/2008042...e-06f3cb7.html