Oil drops below $80 after 3-week rally

[February 23, 2010]  SINGAPORE (AP) -- Oil prices retreated below $80 a barrel Tuesday in Asia as investors mulled whether sluggish U.S. crude demand justified a 14 percent rally over the last three weeks.

Benchmark crude for April delivery was down 34 cents to $79.97 a barrel at midday Singapore time in electronic trading on the New York Mercantile Exchange. The contract added 25 cents to settle at $80.31 on Monday.

Oil has jumped from $69.59 a barrel on Feb. 5 on investor optimism that the global economy will rebound strongly from recession last year. Yet growing inventories of crude, gasoline and diesel fuel suggest demand in the U.S. remains weak.

Some analysts expect crude demand in the U.S. and Japan will gradually follow overall economic growth and lift prices. Goldman Sachs expects crude to trade between $85 and $95 for most of this year.

"Continuing growth in the two largest developed market economies suggests that the economic recovery is still on track." Goldman Sachs said in a report. "We expect that Japanese oil demand will break the trend of the past decade and grow in 2010."

In other Nymex trading in March contracts, heating oil fell 0.2 cent to $2.077 a gallon while gasoline rose 0.1 cent to $2.1168 a gallon. Natural gas gained 2.4 cents to $4.919 per 1,000 cubic feet.

In London, Brent crude was down 43 cents at $78.18 on the ICE futures exchange.

[Associated Press; By ALEX KENNEDY]

Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.