Oil falls to below $97 after weeks of strong gains
NEW YORK (AP) — Oil prices fell below $97 a barrel Monday on signs that the U.S. and Iran may restart nuclear negotiations.
In midday trading in New York benchmark oil for March delivery was down $1.43 to $96.34 a barrel. Oil prices have been rising steadily since they traded near $86 a barrel in mid-December as hopes rose for an improving world economy.
When economies grow, shippers and travelers use more gasoline and diesel, pushing up demand for oil to make the fuels.
Brent crude, the benchmark used to set prices for oil used by many U.S. refineries, was down $1.04 to $115.72 in London.
U.S. retail gasoline prices continued their recent climb, however. The average U.S. pump price rose a penny to $3.52 Monday. The average price has risen 20 cents in just 10 days. The average price is a nickel more than a year ago, and higher than it has ever been at this time of year.
The Energy Department reported Monday that U.S. drivers spent 4 percent of their pre-tax income on gasoline last year, the second highest percentage in thirty years.
Forecasters don't believe drivers will have to pay even more this year. While gasoline prices are higher than last year now, analysts do not expect the recent surge to continue. Oil supplies are relatively high and gasoline demand, especially in the U.S., is weak.
For much of the past two years, tensions in the Middle East have helped keep oil prices high by crimping supplies and raising fears that supplies could be cut even further. Western nations have taken steps to stem the flow of crude out of Iran to try to convince the country to stop what the West says is a program to develop a nuclear weapon.
In response Iran has threatened to disrupt the flow of oil through the Middle East.
On Saturday, while on a visit in Germany, Vice President Joe Biden said Washington was ready for direct talks with Iran over its nuclear program, which Teheran insists is only for peaceful purposes. The Iranian foreign minister on Sunday welcomed Biden's gesture but did not commit to taking up the offer.
Negotiations between Iran and the five permanent members of the U.N. Security Council plus Germany have made little progress and analysts welcomed the possibility of direct talks.
"It seems that small steps in that direction have started," said Olivier Jakob of Petromatrix in Switzerland. "The U.S. had its election, Israel had its election but Iran still needs to go through its elections in June and that could still be a delay in the formal process but already a small change of dynamics will be important."
If Iranian oil that is now embargoed can return to the market, supplies will rise and prices could fall.
In other energy futures trading on the Nymex:
— Wholesale gasoline fell 3 cents to $3.02 per gallon.
— Natural gas rose 3 cents to $3.34 per 1,000 cubic feet.
— Heating oil lost 1 cent to $3.15 a gallon.