Oil Prices Slip to Just Above $69 a Barrel

By GEORGE JAHN

VIENNA, Austria – Crude oil futures prices lost more ground Tuesday amid weakening demand and perceptions that a downward correction after a recent runup was overdue.

Some of the movement appeared linked to comments last week by the International Energy Agency, which said that high prices have pushed oil demand growth lower.

Additionally, the U.S. Federal Reserve raised concerns about inflation, suggesting interest rates might be pushed higher in order to slow growth. And Saudi Oil Minister Ali Naimi said Monday that the market is well supplied, in part because high prices have trimmed consumption levels.

Vienna’s PVM Oil Associates suggested that prices would fall further before stabilizing.

"Expectations are that downward movements could continue towards the $60 level," it said. "All this reflects the market’s nervousness at these high levels, which are hardly justified from a fundamental point of view."

Light, sweet crude for June delivery on the New York Mercantile Ecchange fell 17 cents to $69.24 a barrel in electronic trading by midday in Europe. On Monday the contract had fallen $2.63 to settle at $69.41 a barrel.

On London’s ICE Futures exchange, the front-month Brent crude contract for June, which expires at the close of trading Tuesday, dropped 12 cents to $69.55 a barrel. July Brent gave up 10 cents to trade at $70.08 a barrel.

Gasoline and heating oil futures were essentially steady at $2.056 a gallon and $1.9461 a gallon. Natural gas was up only slightly at $6.138 per 1,000 cubic feet.

Some analysts, however, said the sell-off could be short-lived because of the approaching hurricane season. Last year’s hurricanes Katrina and Rita devastated oil and natural gas production in the Gulf of Mexico, and forced the shutdown of refineries and pipelines that deliver fuel to the East Coast and Midwest markets.

In a sign of worsening relations with Venezuela, the Bush administration said Monday it would ban arms sales to the oil-producing nation because of what it claims is a lack of support by President Hugo Chavez’s leftist government for counterterrorism efforts.

Chavez, who has called Bush a "terrorist" and denounced the U.S.-led war in Iraq, brushed aside the matter, saying his government would not respond with punitive measures.

The re-establishment of diplomatic ties between America and oil-producer Libya may have counterbalanced U.S.-Venezuelan strains.

But concerns about Iran, a major oil exporter, left limited room for prices to fall.

The U.N. atomic agency has found traces of highly enriched uranium at an Iranian site linked to the country’s defense ministry, diplomats said Friday. The finding added to concerns that Tehran was hiding activities related to making nuclear arms.