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Oil near $108 after Saudi explosion report denied

Published: March 2, 2012 | 10:25 am
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Oil prices fell slightly to near $108 a barrel Friday in Asia after Saudi Arabia denied an Iranian media report of an explosion at a Saudi pipeline.

Benchmark oil for April delivery was down 41 cents to $108.43 at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. The contract rose $1.77 to $108.84 per barrel in New York on Thursday. Brent crude was down 55 cents to $125.65 per barrel in London.

Crude jumped to $110.55 earlier in the day after an unconfirmed Iranian media report of a pipeline explosion in Saudi Arabia. Saudi officials later denied the report.

Oil prices have risen from $96 last month amid fears that conflict over Iran’s nuclear program could trigger a disruption in global crude supplies. The U.S. and Europe are imposing sanctions on Iran while the Middle Eastern country has threatened to cut supplies to some countries and halt oil tankers passing through the Persian Gulf’s Strait of Hormuz.

Israel said Thursday it plans to soon test-fire a new ballistic interceptor missile. Israeli Prime Minister Benjamin Netanyahu is scheduled to meet with U.S. President Barack Obama on Monday to discuss Iran.

Signs of an improving U.S. economy have also bolster investor optimism and crude prices. The government said Thursday that applications for unemployment benefits hit a four-year low while spending on residential construction rose and major retailers reported stronger-than-expected sales for February.

“Investors were buying on Iran fears and on general expectations for a stronger economy,” energy consultant Cameron Hanover said in a report. However, “it’s hard for the economy to grow with gasoline and oil prices as high as they are.”

Some analysts are more optimistic that the U.S. economy can continue to improve despite higher fuel costs. U.S. retail gasoline prices rose to an average of $3.74 per gallon this week, 31 cents higher than a month ago.

“Just like we have managed to recover the past few years with gasoline well above $3, we’ll make our way above $4 and even $5,” Carl Larry of Oil Opinions and Outlooks said.

In other energy trading, heating oil fell 1.8 cents to $3.26 per gallon and gasoline futures were down 2.9 cents at $3.32 per gallon. Natural gas rose 0.2 cent at $2.47 per 1,000 cubic feet.

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