Friday, June 5, 2009

Oil Price Rally Comes To A Halt

. Friday, June 5, 2009

By stockOzone team

Oil prices have fallen back with investors growing more cautious as oil approaches the $70-a-barrel mark.

US light, sweet crude oil was down 86 cents at $67.69 a barrel, while Brent crude fell 61 cents to $67.56.

US President Barack Obama has begun a tour of the Middle East, where he will raise the issue of volatile oil prices with Saudi Arabia's King Abdullah.

He is also expected to reassure Saudi that demand for oil will not dry up. Earlier, oil prices had reached $68.64.

"The Saudis want to be assured that there will be a future for oil consumption. They want security of demand," said Simon Wardell, senior oil analyst at Global Insight.

"Obama for his part will be persuading them to continue investing in new production, which is not likely to have too much impact on spot prices in the near term, but will come five or 10 years down the road."

Weaker dollar
The price of oil had initially risen in early trading on Wednesday.

The weakening dollar had pushed up oil prices, which tend to rise when the US currency falls.

In recent weeks, the dollar has declined against a range of currencies, hitting a seven-month low against sterling on Wednesday.

"The continuing softening of the dollar will go on adding strength to oil and equities," said Peter McGuire of Commodity Warrants Australia.

"I think $70 is possible by the end of the week and $74 to $75 by the end of the month."

Oil had briefly touched $69 a barrel on Tuesday, a new seven-month high, before closing at $68.55.

Although the oil price has more than doubled since January, when it was trading at $32.70 a barrel, it is still well below the record $147 a barrel seen in July last year.

Disclosure: Author does not own any of the stocks discussed here.

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