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Oil edges above $133; new record for gas

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[June 11, 2008]  VIENNA, Austria (AP) -- Oil prices rebounded as the dollar weakened against major currencies Wednesday, but investors braced for a volatile trading day ahead of a report on U.S. crude inventories.

ChiropracticGas prices, meanwhile, advanced further into record territory Wednesday, reaching a new record national average of $4.052, according to a survey of stations by AAA and the Oil Price Information Service.

Light, sweet crude for July delivery was up $1.91 at $133.22 a barrel in electronic trading on the New York Mercantile Exchange by noon in Europe.

That came after the contract sank $3.04 to $131.31 a barrel Tuesday on a recovery in the dollar and prospects of slower demand after the U.S. government slashed its oil consumption projections.

"There is no heavy buy, it's just currency play," said Mark Pervan, senior commodity strategist at Australia & New Zealand Bank in Melbourne.

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"The U.S. dollar has a mild recovery in the last couple of days but that has been curbed today, which gives oil trade a bit of confidence," he said. "In the short-term, currency movement has a big sway on sentiment."

Analyst and trader Stephen Schork noted that oil prices headed downward on Tuesday despite harsh statements President Bush and European officials over the nuclear ambitions of Iran, a major OPEC producer.

"Granted, these are just empty threats, but just a few weeks ago a headline that included Bush, Tehran and Nuclear, would have sent oil prices soaring," he said, in his Schork Report. "Instead, the market continued to give back last weeks dubious gain."

The euro bought $1.5492 in morning European trading, up slightly from $1.5449 in New York on Tuesday. But that's down from $1.5768 on Friday.

The dollar's strength early this week came after U.S. Treasury Secretary Henry Paulson said Monday he would not rule out the possibility of intervening in the currency market to stabilize the dollar. That comment, and others, prompted selling by investors who had bought commodities such as oil as a hedge against inflation. Also, a stronger dollar makes oil more expensive to investors overseas.

Traders were also waiting for the results of the weekly U.S. inventory report to be released later Wednesday.

Analysts polled by energy research firm Platts project that the U.S. Energy Department will report that crude oil inventories fell by 1.4 million barrels last week, while gasoline stockpiles are expected to have grown 1.1 million barrels.

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In reports released Tuesday, the U.S. Energy Department and the International Energy Agency both lowered their global oil consumption forecasts for this year because of surging prices, but said demand continues to accelerate in developing nations like China.

Consumption in industrialized nations belonging to the Organization for Economic Cooperation and Development, like Japan, Germany, Britain and the U.S., is now expected to fall by 240,000 barrels a day in 2008, the Energy Department said. Last month, it had forecast that consumption would be unchanged from last year.

In its own monthly report, the Paris-based IEA, an energy adviser to Western industrialized nations, cut its global demand growth forecast for petroleum products such as gasoline, diesel and heating oil to 0.9 percent in 2008. That's down from its earlier forecast of 1.2 percent growth.

But the IEA also said fuel demand for reconstruction work in the aftermath of May's earthquake will boost Chinese oil demand by 5.5 percent this year, a slightly higher forecast than in previous reports.


Reports that Saudi Arabia has increased oil output by 500,000 barrels a day this quarter, 200,000 barrels a day more than previously thought, added some pressure to the market. Still, analysts said the Saudi move was only a peripheral factor in Tuesday's price drop.

"A couple hundred thousand barrels just isn't enough," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Illinois.

In other Nymex trading, July gasoline and heating oil futures both rose over 5 cents to $3.3701 and $3.87 a gallon. July natural gas futures were up nearly 3 pennies at $12.463 per 1,000 cubic feet.

July Brent crude rose $1.90 to $132.92 a barrel on the ICE Futures Exchange.

[Associated Press; By GEORGE JAHN]

Associated Press Writer Eileen Ng contributed to this report from Kuala Lumpur, Malaysia

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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