WASHINGTON – A sell-off in gasoline futures spilled over into crude oil, which fell below $74 a barrel on Monday, but analysts said the underlying pressures that recently drove prices higher — strong demand and geopolitical uncertainty — remain.
Light sweet crude for August delivery fell 84 cents to $73.25 a barrel on the New York Mercantile Exchange, where gasoline futures slid by 6.94 cents to $2.17 a gallon.
"What this looks like, to me, is a sign that the flow of buying supporting the price has become exhausted, at least for now," Citigroup analyst Timothy Evans said in an e-mail.
Oil prices had risen for most of the previous two weeks, reaching an intraday record of $75.78 a barrel on Friday before settling at $74.09.
The Brent crude contract for August fell 87 cents on London's ICE Futures exchange to $72.64 a barrel, but touched a new high Friday of $75.09 a barrel.
The recent runup was fueled by concerns about a diplomatic standoff between the West and Iran, as well as by U.S. government data showing gasoline demand rising despite average pump prices just south of $3 a gallon. The Energy Department said last week that gasoline demand over the past four weeks was around 9.5 million barrels a day, or 1.4 percent higher than a year earlier.
Mike Wittner, global head of energy research at Calyon Bank in London, said the near-term outlook was for higher prices, with the market likely to see oil rise to $80 a barrel before it may retreat to $60.
"All of the near-term variables — hurricanes, geopolitics, refinery outages, and crude supply disruptions — provide upside risk, and any of them can literally happen overnight," Wittner said.
"The drop in prices is more about profit-taking than anything else," said Tobin Gorey, commodity strategist at Commonwealth Bank in Sydney. "We're in the midst of the hurricane season, it would take a lot of courage for anyone to go seriously short now."
Last year, Hurricanes Katrina and Rita swept some rigs from their moorings in the Gulf of Mexico, shuttered production facilities and damaged refineries in Louisiana and Texas.
The standoff between the West and Iran, the second-largest oil producer in the Organization of Petroleum Exporting Countries, has pushed prices higher.
On Friday, Iran's top nuclear negotiator, Ali Larijani, told a news conference in Madrid that the "nuclear issue is not so complicated that it cannot be solved through dialogue." EU foreign policy chief Javier Solana and Larijani met in Brussels, Belgium, last week. A formal meeting is scheduled for Tuesday.
Nymex natural gas futures gained more than 8 cents to $5.605 per 1,000 cubic feet after falling Friday to their lowest level in nearly two years as U.S. supplies in storage grew to roughly 30 percent above their five-year average.