Strong Greenback Won’t Let Oil Leap Back

Thursday oil declined below $124 on picking up U.S. distillates stocks and Iran's reassurances that it would not cut crude exports added to a firming U.S. dollar to limit the upside.

U.S. light, sweet crude for June delivery was down 48 cents a barrel at $123.74 in the Asian session, after having settled down $1.58 at $124.22, and having brought to an end a series of seven consecutive days of intraday record highs. London Brent crude, whose front month June contract expires by the end of Thursday was down 32 cents at $121.54.

Weekly U.S. inventory data showed a larger-than-expected 1.4 million barrels rise in distillates stocks- that include heating oil and diesel fuel, easing concerns about a tightening distillates market that has sent heating oil futures to record-highs this week.

U.S. crude stocks rose by only 200,000 barrels as imports dropped and refiners boosted utilization rates, while gasoline inventories, which are expected to take center stage soon with the start of the U.S. driving season by the end of the May, fell by 1.7 million barrels.

Also helping to cap prices, a senior Iranian official said on Wednesday Iran had no plans to cut exports to world markets.
On Tuesday, a report had quoted Iranian President Mahmoud Ahmadinejad as saying a proposal to reduce the country's output was being reviewed by experts.

Adding to the softer tone on Thursday, the dollar rose against the yen to near a 2-month high on recent stability in U.S. share prices, higher U.S. bond yields and growing perception that the worst of the credit crisis may be over.