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May rally for energy prices stalls

RAPIDLY climbing energy prices stalled this week as a steady stream of dismal financial news suggested that even if the global economy has bottomed out, it will be some time before demand for crude rebounds.

Benchmark crude for June delivery dropped US$2.28 to settle at US$56.34 a barrel on the New York Mercantile Exchange. Since the start of May, oil prices have jumped by nearly US$8 a barrel as it appeared the worst of the recession was over.

But a string of forecasts showing a larger drop in world oil consumption sent prices downward to end the week. The International Energy Agency, the US Energy Information Administration and the Organization of Petroleum Exporting Countries all lowered crude demand expectations this week.

Retail gas prices continued to rise yesterday, as they have every day this month, with refiners cutting back on production to match lessening demand. A forecast by AAA showed that more Americans are expected to travel on Memorial Day than last year, but few are predicting a healthy summer travel season.

A number of oil analysts believe that the only thing propping up energy prices this year is the re-entry into the market of hedge funds and other large investors who see crude as a hedge against inflation. Many traders on Nymex do not believe there are fundamentals in place to support prices this high.

Prices at the pump rose another penny overnight to US$2.29 a gallon (about 60 cents a liter), according to auto club AAA, Wright Express and Oil Price Information Service. Gas is 23.9 cents a gallon more expensive than last month, but US$1.486 cheaper than last year.

Prices are rising just before the Memorial Day weekend (May 23-25) and the unofficial start of summer driving season.

In other Nymex trading, gasoline for June delivery was down 4.31 cents to settle at US$1.6806 a gallon and heating oil dropped 7.59 cents to settle at US$1.4188 a gallon. Natural gas for June delivery slid 19.4 cents to settle at US$4.098 per 1,000 cubic feet.

In London, Brent prices lost 71 cents to settle at US$55.98 a barrel on the ICE Futures exchange.


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