Dow Jones Real-Time News for InvestorsSM
07:19 a.m. 05/18/2006
DOW JONES NEWSWIRES
LONDON (Dow Jones)--Crude oil futures in London traded lower Thursday as speculators remained concerned about the prospect of further U.S. interest rate hikes and a slowing global economy.
At 1100 GMT, the front-month July Brent contract on London's ICE Futures exchange was down 18 cents at $68.86 a barrel.
The front month June crude contract on the New York Mercantile Exchange was trading 18 cents lower at $68.51/bbl.
In terms of products, the ICE's gasoil contract for June delivery was down $1.75 at $610.25 a metric ton.
Crude extended the previous session's weakness as investors remain jittery about inflation.
The entire commodity complex as well as global equity markets were rocked Wednesday by a U.S. consumer price index reading for April that heightened fears about interest rate hikes.
The U.S. Labor Department said core consumer prices grew by a larger-than-expected 0.3% in April. The rise placed the annual rate of core inflation at 2.3%, above the 2% limit with which the U.S. Fed is thought to be comfortable.
"We seem to be rather locked into what other markets are doing," said an oil broker, noting weaker equities had put pressure on the commodities sector.
"It looks like markets are in the doldrums now," said another broker, who said oil prices could pullback to around the $64/bbl level.
Crude oil sentiment was dealt a further blow by a modestly bearish weekly inventory report from the U.S. Department of Energy Wednesday.
The data showed a 1.3 million barrel build in U.S. gasoline stocks, while crude oil and distillate inventories fell by 100,000 barrels in the week ended May 12.
"The oil product inventory overhang continues to be whittled away, with the gaps closing in distillates, while gasoline inventories are keeping pace with the normal pattern despite surprisingly high import levels being recorded," said analysts at Barclays Capital in London.
Despite oil's correction Thursday Iran's unresolved standoff with the West over its uranium enrichment activities is still helping prop up the bull case for prices.
Earlier Thursday U.N. Secretary-general Kofi Annan said the Iranian situation is a "crisis" in need of urgent attention by the international community.
Annan, speaking at the Japan National Press Club, said only a negotiated settlement would resolve the dispute over Iran's uranium enrichment program.
"It is a crisis in the sense we need to work very actively," Annan told reporters.
-By Lananh Nguyen, Dow Jones Newswires; +44 (0) 207-842- 9479; lananh.nguyen@dowjones.com
