OIL FUTURES: Crude Eases As Saudi Arabia Denies Pipeline Blast
First Published Friday, 2nd March 2012 02:57 pm - © 2012 Dow Jones
--Futures decline after Saudi Arabia denies reports of pipeline explosion
--Nymex crude hit 9-month high; Brent touched 4-year high on rumors
--Stronger dollar weighs
By Dan Strumpf
Of Dow Jones NEWSWIRES
NEW YORK -(Dow Jones)- Oil futures retreated Friday after Saudi Arabia denied reports of a major pipeline explosion, easing fears about an imminent supply disruption.
Light, sweet crude for April delivery fell 95 cents, or 0.9%, to $107.89 a barrel on the New York Mercantile Exchange. Brent crude on ICE Futures Europe traded $1.38, or 1.1%, lower at $124.82 a barrel.
Futures declined after Saudi officials said late Thursday that reports of an explosion at a main pipeline in the country's oil-rich Eastern Province were untrue. The reports, from Iran's PressTV and a website called the Arab Digest, sent Nymex crude futures soaring to a fresh nine-month high in electronic trading. Brent crude surged to its highest level in four years.
"Some people got caught in that rumor yesterday," said Ray Carbone, president of oil options brokerage Paramount Options in New York. "We had a big run up, and yesterday's rumor just spooked people."
Analysts said the sudden spike in prices underscores the oil market's sensitivity to even the possibility of supply disruptions in major oil producing countries.
Crude futures have been on edge for at least a year because of these worries. The source of concern most recently has been Iran, which produces some 3.5 million barrels of oil a day. Fears have mounted that saber-rattling over Tehran's nuclear program could lead to a halt of exports, military conflict or disruption of maritime traffic in the Strait of Hormuz, a major oil passage.
Saudi Arabia's importance to the oil market, however, is vastly greater than Iran's. The country produces nearly 10 million barrels a day and exports more oil than any other country.
"The ability of the Brent market to advance off of such an unfounded rumor served notice of a tightening European market that is indicating little room for additional supply disruptions," said Jim Ritterbusch, head of the oil-trading advisory firm Ritterbusch and Associates, in a research report.
Meanwhile, market participants continued to keep an eye on developments in Europe, where leaders signed a new fiscal pact imposing strict austerity measures. The euro fell against the dollar following the adoption of the new plan, designed to avert another sovereign-debt crisis.
A stronger dollar typically pressures oil prices by making the dollar-denominated commodity more expensive for holders of other currencies. The euro was recently down 0.7% at $1.3226.
Front-month April reformulated gasoline blendstock, or RBOB, recently fell 4.52 cents, or 1.4%, to $3.3065 a gallon. April heating oil fell 3.34 cents, or 1%, to $3.2419 a gallon.
-By Dan Strumpf, Dow Jones Newswires; 212-416-2818; firstname.lastname@example.org.