Oil Futures Fall Almost $1 a Barrel

By GEORGE JAHN

VIENNA, Austria – Crude oil prices fell nearly $1 a barrel Monday in a selloff prompted by weakness in the commodities market and concerns that high oil prices are hurting demand.

Markets were also still reacting to Iran’s OPEC governor Hossein Kazempour Ardebili’s comments Friday that the cartel was unlikely to trim output when it meets June 1, despite the fundamentals clearly indicating a surplus of crude in the oil markets.

"The market is looking at possible demand slowdown caused by high oil prices," said Tetsu Emori, chief commodities strategist at Mitsui Bussan Futures in Tokyo.

Emori was referring to U.S. government data released last Wednesday that showed demand appeared to be flattening out as a result of high prices. The Department of Energy said U.S. gasoline demand over the past four weeks was 9.2 million barrels per day, or about even with the same period last year.

Light, sweet crude for June delivery on the New York Mercantile Exchange fell 93 cents to $67.60 a barrel in electronic trading by afternoon in Europe. The June contract expires later Monday. The July contract fell nearly 77 cents to $68.52 a barrel.

Gasoline dipped more than 2 cents to $2.0137 a gallon while heating oil slipped by 1.5 cents to $1.905 a gallon. Natural gas prices were flat at $5.962 per 1,000 cubic feet.

July Brent crude on London’s ICE futures exchange fell 74 cents to $67.94 a barrel.

Weaker crude prices also coincided with a strong U.S. dollar, which hit a two-week high against the yen Monday, amid renewed worries about rising U.S. inflation that recently triggered broad selloffs across commodities markets.

However, some expected the downtrend to be short-lived as concerns remained about how the West’s standoff with Iran over the Islamic republic’s nuclear ambitions will affect that nation’s oil exports, as well as supply disruptions in Nigeria and the Gulf of Mexico during hurricane season.

"At least in some quarters of the market there’s a feeling that the downward price correction over the last week to below $70 provides a buying opportunity," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.

Vienna’s PVM Oil Associates noted "soothing news" from Nigeria, with the country’s biggest operator, Royal Dutch Shell PLC, hoping to recoup some of its lost production amounting to more than 450,000 barrels a day "rather earlier than later." Still, it said, a threatened strike at Exxon Mobil Corp. could cut into Nigerian output even as Shell reduces its losses.

Iran said Sunday it was waiting to see what offer the Europeans present to resolve the confrontation – taking a somewhat more open tone than staunch rejections voiced by officials in recent weeks, which added to the downward pressure on oil prices.

The five U.N. Security Council nations plus Germany are working on a draft proposal that would offer Iran an end to U.N. Security Council pressure if it agrees to suspend uranium enrichment. But if Iran refuses, it could face sanctions backed by the threat of force.

The Security Council has demanded Iran stop enrichment, a crucial process that can produce either fuel for a reactor or material for a nuclear warhead. The United States accuses Iran of seeking to produce weapons, though Iran insists it intends only to generate electricity.

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Associated Press Writer Gillian Wong in Singapore contributed to this report.