Oil prices slipped toward $72 a barrel on Friday as dealers took profits from a 5 percent rally earlier in the week and the US dollar bounced from a near-one-year low. US crude for October delivery fell 43 cents to settle at $72.04 a barrel while London Brent fell 23 cents to $71.32.
"After being up for much of the week the market took a slight breather today and the dollar was able to show some strength," said Tom Bentz, analyst at BNP Paribas Commodity Futures Inc. Oil prices started the week below $70 a barrel, then rose on strength in equities markets and heavy losses in the US dollar that boosted the purchasing power of commodities buyers using other currencies.
The ICE Futures US dollar index, which tracks the value of the greenback, rose on Friday from a near one-year low as investors covered short positions and softer equities in Europe and Asia cooled risk appetite. Oil was also under pressure from a government report this week showing growth in US refined fuel inventories, with distillates at their highest levels since 1983.
Oil's losses were limited somewhat by mild gains on Wall Street, fuelled by brokerage stocks upgrades. European and Asian equities slipped earlier Friday as recent hefty gains prompted investors to book profits. Some analysts said oil prices could move higher in coming weeks as some recent positive economic data supported expectations that a global economic revival was under way and energy demand would soon recover.
"Momentum is starting to build for a break to the upside as there is mounting evidence of an improving global economy in general," analysts at Barclay's Capital wrote in a commodities research note. Another analyst, Tim Evans at Citi Futures Perspective, said that high stockpile levels and increased quota-busting by Opec producers could produce the same basic conditions that set the stage for a $15 price drop in early July. Crude is up nearly 62 percent this year, but is still about 51 percent off its July 2008 record of more than $147.