Heated By Fears Oil Calms Down

Oil prices calmed Tuesday after hitting by almost $3 a barrel in the past session for the reason of concerning about falling gasoline supplies and expectations that U.S. interest rates will be again decreased.

As traders bet that future U.S. Federal Reserve rate cuts will weaken the U.S. currency oil inched up Monday. A weak greenback attracts investors to hard commodities such as oil, which are seen as a hedge against inflation. So says Mark Pervan, senior commodity strategist with the ANZ Bank in Melbourne. Also, a falling dollar makes oil cheaper to overseas investors.

Light, sweet crude for delivery in May went down loosing 24 cents to $108.85 a barrel in Asian electronic trading on the New York Mercantile Exchange by midday in Singapore. The contract soared $2.86 overnight to settle at $109.09 a barrel on the Nymex, the highest settlement for a front-month contract since March 18.

The last month's trading record of $111.80 a barrel is nearly reached by Oil futures after a swoon that twice brought them briefly below $100. The hit is helped by a growing belief that gasoline supplies are falling as the summer driving season in the U.S. is coming.

Analysts say refiners have cut back on gasoline production due to low profit margins. The rising price of crude means it costs refiners more to turn the raw product into motor fuel.

The prospect that the Organization of Petroleum Exporting Countries will hold production steady this year also pushed oil prices higher Monday.

In other Nymex trading Tuesday, May heating oil futures fell 0.33 cent to $3.081 a gallon, while May gasoline prices lost 0.35 cent to $2.78 a gallon.

Natural gas futures dropped 3.6 cents to $9.755 per 1,000 cubic feet.

In London, May Brent crude fell 14 cents to $107 a barrel on the ICE Futures Exchange after rising $2.24 overnight to settle at $107.14 a barrel.