Oil Sets Back On Strengthening Greenback

Friday oil fell further after declining more than $2 a barrel in the previous session as the U.S. greenback became much stronger, inciting investors to book profits.

Oil leaped back toward $120 PB Thursday after the dollar gained against the euro. Investors see commodities such as oil as a less effective hedge against inflation when the dollar strengthens. A stronger greenback also makes oil more expensive to investors overseas.

Light, sweet crude for June delivery dropped 11 cents to $115.95 a barrel in Asian electronic trading on the Nymex by midday in Singapore.

The contract fell $2.24 overnight to settle at $116.06 a barrel on the New York Mercantile Exchange. It sank as low as $114.25 a barrel during the session.
Analysts said the dollar gained ground Thursday on speculation the Federal Reserve is growing concerned about inflation and may not cut interest rates as much as once thought. Higher interest rates tend to stabilize or strengthen the dollar.

Few analysts are willing to predict that oil's record run is over. Investors remain concerned about tight supplies of oil amid growing global demand, they say.
Feeding those concerns, about 170,000 barrels a day of Nigerian production remained shut-in following a pipeline attack late last week. BP PLC is also considering shutting down its 700,000 barrel-a-day Forties pipeline system if a strike continues at a U.K. refinery.

In other Nymex trading, heating oil futures fell 0.5 cent to $3.2533 a gallon while gasoline prices dropped 0.53 cent to $3.0133 a gallon. Natural gas futures lost 5.9 cents to $10.731 per 1,000 cubic feet.
Brent crude futures rose 6 cents to $114.40 a barrel on the ICE Futures exchange in London.