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Oil Futures Fall to Near $66 a Barrel

Posted on: Tuesday, 4 April 2006, 06:00 CDT

LONDON - Oil prices dipped Tuesday as traders continued to take gains from a recent rally, though analysts said concerns about petroleum supply out of Iran and Nigeria kept a high floor under prices.

Light, sweet crude for May delivery fell 53 cents to $66.21 a barrel in electronic trading on the New York Mercantile Exchange by midday in Europe. Brent crude for May fell 64 cents to $66.20 a barrel on London's ICE Futures exchange.

Gasoline futures dipped a cent to $1.8529 a gallon while heating oil fell nearly 2 cents to $1.8435 a gallon. Natural gas lost more than 10 cents to $7.142 per 1,000 cubic feet.

Last week, prices made solid gains on supply concerns linked to U.S. gasoline inventories, which have been falling ahead of the U.S. summer, when demand peaks.

"The profit taking is still continuing today," said Ken Hasegawa of brokerage Himarawi CX in Tokyo, who predicted the front-month crude contract would stay within the $66-$66.80 a barrel range.

The uncertain outlook for supplies out of Iran and Nigeria was bolstering oil prices, analysts said.

"With less than 2.0 million barrels of spare production capacity, even with higher-than-average supply of oil, the margin of error in the world oil market has never been thinner," said Phil Flynn of Alaron Trading Corp. in a research note. "And with worries about possible supply disruptions in Iran, Nigeria and Venezuela and another hurricane season ahead of us, traders are betting that it's likely something is going to go wrong."

The U.N. Security Council voted unanimously last week to demand that Iran suspend nuclear enrichment but Iran has remained defiant, saying enrichment is "irreversible." The standoff has ratcheted up tensions over Iran's nuclear program.

Iran said Monday it successfully tested its second new torpedo in as many days, the latest weapon to be unveiled during war games in the Gulf that the military said are aimed at preparing the country's defenses against the United States.

Another concern is Nigeria, where about 27 percent of oil output has been knocked out by ethnic rebel attacks in the Niger Delta region. Militants have pledged more attacks to get southerners a bigger cut of the oil revenues held by the federal government. The country usually produces 2.4 million barrels a day.

Nigerian Oil Minister Edmund Daukoru said Monday that Royal Dutch Shell PLC has told him it will take about month to bring back most of the oil production that has been shut down.

Nigeria is the fifth-largest exporter of crude to the U.S. and almost half of the country's daily output comes from Shell-run operations.

Source: Associated Press/AP Online

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