Oil Prices Drop Below $75 a Barrel in Asia

By GILLIAN WONG

SINGAPORE – Oil prices fell below $75 a barrel Friday after U.S. supply data showed an unexpected increase in domestic gasoline stocks. But geopolitical tensions and rising gasoline demand continued to support prices, traders said.

Light, sweet crude for August delivery fell 30 cents to $74.84 a barrel in electronic trading on the New York Mercantile Exchange. August Brent crude on London’s ICE Futures exchange edged up 1 cent to $74.09 a barrel.

Gasoline futures lost more than a cent to $2.2459 a gallon while heating oil prices fell a cent to $2.0477 a gallon.

In its weekly inventory report, the U.S. Department of Energy said the country’s supply of gasoline unexpectedly rose by 700,000 barrels to 213.1 million barrels, or 1.4 percent lower than a year ago. But the department also said U.S. gasoline consumption over the past four weeks averaged 9.5 million barrels a day, or 1.4 percent more than a year ago.

America’s growing appetite for motor fuel comes despite an average nationwide pump price that is just below $3 a gallon – a level many analysts once believed would sap consumption.

Natural gas futures dropped 2 cents to $5.653 per 1,000 cubic feet, after falling to settle at $5.664 in the previous session – the lowest closing price since Sept. 27, 2004.

The United States is awash in natural gas and some analysts believe there may not be enough underground storage capacity, potentially forcing some producers to shut wells. Others say the falling price will spark more demand.

Commercial inventories of crude oil declined by 2.4 million barrels last week to 341.3 million barrels, or 3.6 percent above year ago levels.

Oil futures set an intraday record of $75.40 a barrel Wednesday before settling at $75.19, an all-time closing high on Nymex, where oil trading began in 1983.

Analysts said the spike likely had more to do with an increase in geopolitical uncertainties than already-tight market fundamentals.

Iran remains in a stalemate with the West, which is concerned about Tehran’s nuclear ambitions. Iran’s top nuclear negotiator, Ali Larijani, said this week his country remains "serious" about continuing negotiations to defuse the international standoff.

President Bush also said the United States will seek a diplomatic solution to a standoff with North Korea, which test-fired missiles earlier in the week.

In Nigeria, armed men kidnapped a Dutch oil worker, the second hostage taking in less than 24 hours in a region where regular raids continue to destabilize oil production. Attacks on oil pipelines and kidnappings have cut Nigerian oil production by more than 500,000 barrels a day, or 20 percent, this year.