- The Washington Times - Tuesday, January 8, 2008

NEW YORK (AP) — Oil futures fell sharply yesterday, extending their retreat from $100 as investors sold on concerns that a cooling economy will curb demand for oil and gasoline.

Comments by Treasury Secretary Henry M. Paulson Jr. yesterday suggesting there is no simple fix for the nation’s housing crisis added to worries about the economy raised by Friday’s Labor Department jobs report; the government’s data showed that employers added far fewer jobs last month than expected.

Traders seemed to shrug off news of a confrontation Sunday between U.S. and Iranian warships in the Strait of Hormuz.

“The market overall is still a bit spooked by the larger economy question,” said Kevin Saville, managing editor for the Americas energy desk at Platts, the energy research arm of the McGraw-Hill Cos.

A stronger dollar yesterday also weighed on oil prices. Crude futures offer a hedge against a falling dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the greenback is falling.

Many analysts believe the weakening dollar helped draw speculative investors into oil markets this fall and winter, driving oil prices above $100 a barrel last week.

Yesterday, light, sweet crude for February delivery dropped $2.82 to settle at $95.09 a barrel on the New York Mercantile Exchange (Nymex). It was the third day in a row oil prices declined.

Earlier yesterday, oil prices rose after U.S. military officials said Iranian Revolutionary Guard boats harassed and provoked three U.S. Navy ships in the strategic Strait of Hormuz.

“There was a bit of a jump there … but unless there were shots being fired, it wasn’t going to be sustained,” Mr. Saville said.

Concerns that the West’s standoff with Iran could grow into a wider confrontation helped boost oil prices last year.

At the pump, meanwhile, gas prices rose 0.2 cent overnight to a national average of $3.106 a gallon, according to AAA and the Oil Price Information Service.

Gas prices have been on the rise for weeks, following oil’s jump back into record territory. But with oil prices now sliding, the gains at the pump are likely to be limited, analysts say.

February gasoline futures fell 8.12 cents on the Nymex to settle at $2.4298 yesterday.

Heating oil futures fell on forecasts for unseasonably warm weather in the Northeast over the next few days, said Addison Armstrong, director of exchange traded markets at TFS Energy Futures LLC in Stamford, Conn., in a research note.

“Longer-range forecasts are also expected to yield warmer than usual temperatures for the month of January, keeping a lid on demand until colder temperatures return,” Mr. Addison said.

February heating oil futures fell 9 cents on the Nymex to settle at $2.5935 a gallon.

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