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Oil dips below $65 after hitting 6-month high

Oil prices pulled back from a six-month high to below $65 a barrel on Friday in Asia after jumping overnight on a fall in US oil inventories and signs of economic improvement.

world Updated: May 29, 2009 14:12 IST

Oil prices pulled back from a six-month high to below $65 a barrel on Friday in Asia after jumping overnight on a fall in US oil inventories and signs of economic improvement.

Benchmark crude for July delivery was down 26 cents to $64.82 a barrel by mid-day in Singapore in electronic trading on the New York Mercantile Exchange. On Thursday, the contract rose $1.63 to settle at $65.08, a six-month high.

The Energy Department’s Energy Information Administration on Thursday said US oil supplies dropped unexpectedly by 5.4 million barrels last week. Though crude inventories remain near 19-year highs, it was the third week in a row that supplies have fallen.

Investors were also cheered by signs the US economy is improving. The government reported on Thursday that demand for big-ticket manufactured goods in April had its biggest jump in 16 months. It was the second increase in the past three months came after the number of newly laid-off people requesting jobless benefits fell last week.

“We’ve got a lot more optimism about the economic outlook than we did,” said Toby Hassall, an analyst with Commodity Warrants Australia in Sydney. “The market is factoring in a recovery in demand by the end of the year.”
“But there’s no real evidence that demand is picking up at this point.”

The Organization of Petroleum Exporting Countries said on Thursday at a meeting in Vienna that it will keep output levels unchanged. OPEC announced production cuts of 4.2 million barrels a day between September and January, but has kept output steady since then.

“Their strategy over the last year has been very successful,” Hassall said. “They’ve been very effective at making the right quota cuts. They haven’t cut too much.”

Oil prices have almost doubled from below $35 a barrel in March.

In other Nymex trading, gasoline for June delivery fell 0.50 cent to $1.91 a gallon and heating oil dropped 0.69 cent to $1.59 a gallon. Natural gas for June delivery slid 2.8 cents to $3.93 per 1,000 cubic feet.

In London, Brent prices fell 34 cents to $64.05 a barrel on the ICE Futures exchange.