By Jonathan Leff
Weak dollar and supply concerns push crude higher after an early pullback.
Oil recouped early losses to stand around $110 a barrel on Monday after initial dollar gains faded, despite an unexpected warning from the Group of Seven (G7) nations against excessive currency fluctuations.
US light, sweet crude oil futures for May delivery were 5 cents lower at $110.09 by 0704 GMT, bouncing back from an earlier low of $109.56. Prices hit a record high $112.21 a barrel on Wednesday after a big fall in US oil stocks.
London Brent crude fell 15 cents to $108.60 a barrel.
After meeting on Friday, G7 finance ministers and central bankers issued a statement saying they were concerned by the sharp moves in foreign exchange markets in recent weeks. That was a marked change in their tone and was taken as a warning that the dollar was falling too fast.
The euro fell sharply in Asian trade on Monday but later pared those losses to stand around $1.5760, only slightly down from $1.5835 late in New York on Friday.
Other commodity markets including gold and corn also pared or reversed earlier losses as traders bet the dollar's early rebound could be a short-lived reaction to G7 talk, doing little to change the greenback's long-term decline.
But gains were held in check by the growing gloom over the outlook for the US economy following a nasty earnings surprise from General Electric and a drop in US consumer confidence to its lowest in more than a quarter century.
"With the headwinds in the global crude oil market starting to blow harder, the smooth sailing days for crude oil prices may be coming to an end," Martin King, analyst with First Energy Capital, wrote in a report.
The dollar had fallen on Friday, offsetting the bearish impact of the sharpest one-off cut in the International Energy Agency's (IEA) global oil demand growth forecast since 2001.
The energy watchdog slashed its 2008 global oil consumption forecast by 460,000 barrels per day (bpd) to 1.27 million bpd due to high prices and the faltering US economy, but said demand from China and the Middle East remained largely intact.
On the supply side, Shell Oil said the 1,073-kilometre Capline crude oil pipeline, which brings crude from the Gulf of Mexico to the US Midwest, remained shut on Sunday afternoon as work continued to repair a leak. It could not estimate when the line would return to service.
Short-term speculators in the crude oil market, who had sharply cut their bullish bets since mid-March, increased their net long positions in the week to April 8, according to regulatory data released on Friday.
Net crude long positions rose to 64,699 lots, up from 47,073 in the previous week, the CFTC reported, just as US oil prices rallied to a record high on Wednesday. (Reuters)For all the latest energy and oil news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.