Oil slips as global economic worries re-emerge
By GEORGE JAHN,Associated Press Writer AP - 1 hour 1 minute ago
VIENNA, Austria - Re-emerging global economic worries nudged oil prices lower Monday, but the fall was kept in check by evidence that OPEC was serious about production cutbacks and new unrest in oil-rich Nigeria.
A dispute between Ukraine and Russia over gas imports and Israel's ground offensive in Gaza also kept tensions high, although analysts were split over how much the conflict in the Middle East is affecting markets.
After rising for much of the day, oil prices moved into negative territory as the focus turned toward the United States, the world's largest economy. Expectations are that the Commerce Department on Monday will report another sharp drop in construction spending for November, and that automakers will report further declines in December vehicle sales.
Light, sweet crude for February delivery slipped 56 cents to $45.78 a barrel in electronic trading on the New York Mercantile Exchange by afternoon in Europe. The contract rose Friday $1.74 to settle at $46.34.
On the price support side, JBC Energy said in a research note that crude was being propped up by "increasing evidence that OPEC is adhering to its agreed production cuts and the announcement of the U.S. government to add more oil into its strategic reserves."
Price declines were also kept in check by the "latest news from Nigeria that saboteurs had attacked and partly destroyed part of a pipeline," the analysts said.
Nigerian regional army chief Brig. Gen. Wuyep Rimtip said Saturday he did not know how severely the pipeline was damaged and suspected local youths rather than militants were responsible for the attack.
Nigeria's major militant group, the Movement for the Emancipation of the Niger Delta, declared a cease-fire in September, but has warned that attacks could resume if it is provoked.
In the oil-rich Middle East, tensions were high as thousands of Israeli troops backed by tanks and helicopter gunships surrounded Gaza's largest city and fought Hamas militants at close range Sunday, as the offensive moved from airstrikes to artillery shelling and ground fighting in a bid to stop rocket fire on southern Israel.
An Iranian Revolutionary Guard commander on Monday urged Islamic nations to use oil as a weapon to exert pressure on Western backers of Israel.
Still, even Iran _ among the more radical OPEC members _ was unlikely to jeopardize its oil income, and with no oil producing nation directly involved, analysts were split over the market impact of the Gaza unrest.
"With Israeli troops going into Gaza, that just heightens fears of the possibility of a wider Middle East conflict," said Ken Hasegawa, an energy analyst with broker Newedge in Tokyo. "Prices will likely continue to rise in the short term."
In Vienna, however, JBC Energy said that to all appearances the conflict "has not had much of an impact so far."
Victor Shum, an energy analyst with Purvin & Gertz in Singapore, said prices "will depend on OPEC's compliance with their output cuts and the health of the global economy." Shum said he expects prices to average in the low $50s this year.
Iran's state television said OPEC countries have decided to hold an extraordinary meeting on falling oil prices in Kuwait in February. The report on Monday quoted Iran's OPEC governor Mohammad Ali Khatibi as saying the organization planned to bring forward the regular meeting in March because the "trend of oil prices" calls for holding a meeting a month earlier.
A dispute between Russia and Ukraine over natural gas payments also concerned traders Monday. Russian gas monopoly Gazprom has cut off gas shipments to Ukraine since Thursday, and Ukraine has warned that European customers could see serious natural gas disruptions in about two weeks.
Gazprom has continued to send gas to Europe, which relies on it for a quarter of its gas. But 80 percent of the gas Gazprom sends west passes through the same pipelines that supply Ukraine, and over the past four days the pressure in the pipelines has dropped. Some European countries _ including Bulgaria, the Czech Republic, Hungary, Poland and Romania _ have reported a decline in supplies.
Gas and oil prices are closely linked, with price hikes in one commodity usually reflected by increase in the other.
In other Nymex trading, gasoline and oil futures showed little movement at $1.11 and $1.48 a gallon while natural gas for February delivery was up by close to 4 cents at $6.00 per 1,000 cubic feet.
In London, February Brent crude lost 16 cents to fetch $46.75 a barrel on the ICE Futures exchange.
Associated Press writer Alex Kennedy contributed to this report from Singapore.
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