|
 By midday in Europe, Light, sweet crude for July delivery was down 17 cents at $127.59 a barrel in electronic trading on the New York Mercantile Exchange. On Monday, the contract rose 41 cents to settle at $127.76.
In London, Brent crude on the ICE Futures exchange fell 10 cents to $127.92 a barrel.
Oil prices have fallen back sharply over the last dozen days after climbing above a record $135 a barrel on May 22. Prices edged higher on Monday on concerns about heating oil supplies and after an OPEC official said there is no need for the cartel to pump more oil.
"Typically a seesaw pattern is an indication that the market has peaked," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore. "But some see this as an opportunity to buy. Global demand remains tight and supply remains restrained."
Investors were digesting reports that Iran's top Organization of Petroleum Exporting Countries official said there is no need for a special OPEC meeting to discuss raising output, said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.
Flynn said oil futures also rose Monday rose in sympathy with natural gas futures, which soared as high temperatures in many parts of the U.S. raised demand from utilities that use natural gas to generate electricity for home cooling. July natural gas futures were up 8.8 cents in Asian trading at $12.057 per 1,000 cubic feet.
Shum said the oil market remains "structurally tight," meaning that global demand continues to grow despite an economic slowdown in the U.S.
-- the world's top oil consumer -- while supplies remain constrained.
"OPEC supply has failed to meet expectations. There's not a great deal of spare capacity in OPEC," he said.
Shum said some traders took heart in the slight improvement of a key indicator for the U.S. manufacturing sector.
The Institute for Supply Management's index of manufacturing activity edged up to 49.6 in May compared with an April reading of 48.6, easing some concerns that soaring oil prices were crushing manufacturers. However, the reading remained below 50, the dividing point that indicates if manufacturing is in a recession.
[to top of second column] |
 With global stock markets still weak compared with the robust gains of the past few years, many investors see better potential for gains in the oil market. Speculative buying has been cited as a major reason behind oil's more than doubling its price in a year.
"As an asset class, oil has performed better than stocks and bonds," said Shum. "Until global equities turn better, oil demand collapses or supplies increase significantly, we're not going to see a substantial drop in oil prices."
Traders are also edgy about possible disruptions now that the Atlantic hurricane season has officially begun.
"The market may have found some support from the start of the hurricane season," said analysts at JBC Energy in Vienna, Austria.
While the first storm, Arthur, weakened into a tropical depression, two ports in Mexico remained shut over the weekend and oil exports to the United States were temporarily reduced, JBC said.
"Later in the summer, if we get a threatening storm in U.S. Gulf of Mexico we could have a new peak" above $135, Shum said.
In other Nymex trading, heating oil futures rose 1.95 cents to $3.7415 a gallon while gasoline prices dropped 0.47 cent to $3.3860 a gallon. Natural gas futures were up 20.3 cents to $12.172 per 1,000 cubic feet.
[Associated Press; By PABLO GORONDI]
AP Business Writer Malcolm Foster in Bangkok, Thailand, contributed to this report.
Copyright 2008 The Associated Press. All rights reserved. This
material may not be published, broadcast, rewritten or
redistributed.
 |
