Oil prices slipped on Thursday after stronger-than-expected US retail sales data boosted the dollar. US crude fell 79 cents to $135.59 a barrel by 1:41 pm EDT (1741 GMT) following a $5 surge in prices on Wednesday, while London Brent crude dropped 7 cents to $134.95 a barrel. "It's all about the dollar," said Nauman Barakat, senior vice president at Macquarie Futures USA.
The slumping dollar has pushed investors into commodities this year as a hedge against inflation and the weak greenback. The dollar gained on Thursday after a government report showed total sales at US retailers rose 1 percent in May - twice as much as expected.
Oil's losses also came amid news that US regulators are seeking a deal with their counterparts in the United Kingdom to impose position limits on US crude contracts traded on the ICE Futures Europe exchange.
The move could shake some speculators out of the market, analysts said. "It is sending the message that the CFTC will be taking action, this is probably the first of many steps they are going to implement. It has implications for larger institutional traders, pension funds, hedge funds that have been in the oil markets," said Rob Kurzatkowski, futures analyst for optionsXpress in Chicago.
Oil dipped as low as $131.55 before trimming losses on news Nigeria's senior oil workers' union renewed a strike threat, raising supply worries. Oil prices have jumped roughly 40 percent since the start of this year, hitting an all-time high above $139 last week. Commodities markets have boomed over the past six years as demand from emerging economies tests supply growth.
Oil consuming and producing nations, often at odds over they cause of the spike in prices, will meet in Opec kingpin Saudi Arabia on June 22 to seek a solution to rising energy costs that have sparked riots across the globe. US officials have blamed the surge in prices on fundamentals, and have called on Opec to ramp up output to help cool down markets.
But Opec members blame speculators for high prices and insist they can do nothing to lower prices. "The market fundamentals are not affecting prices. The problem is the economic crisis in the United States which led to a fall in the dollar's value, and threats against Iran which increased geopolitical tensions," Opec President Chakib Khelil said, according to Algerian state news agency APS. "Supply at present exceeds demand, and there is a surplus of around 500,000 barrels per day," Khelil said, adding that Opec would hold its scheduled meeting on September 9 to "evaluate the market and take decisions to stabilise it."
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