Prices close below $106 as consumer spending remains flat in February and dollar rebounds

Crude prices fell substantially lower on Friday, 28 March, 2008 as fresh concerns about the health of the US economy cropped up. Ongoing supply tensions from Iraq and rebounding dollar also weighed on the crude prices for the day. In the previous three sessions prior to Friday, crude had gained more than $7.

Crude-oil futures for light sweet crude for May delivery closed at $105.62/barrel (lower by $1.96/barrel or 1.8%) on the New York Mercantile Exchange. Crude prices are 65% higher on a yearly basis.

The crude ended the week lower by more 3%. Also helping to push oil higher this week was the weak dollar. The dollar index, which tracks the value of the greenback against a basket of other currencies, has dropped 1.4% this week.

The Commerce Department reported on Friday that U.S. consumer spending was flat in February after adjusting for inflation, the third consecutive month of weak consumer demand.

Earlier in the week, it was reported that a pipeline explosion took place in southern Iraq cutting supplies to the country's main export terminal. Also, clashes between Iraqi forces and militants were raging.

Natural gas advanced as speculators who had sold contracts in bad bets on falling prices bought the positions back to protect gains or limit losses. Natural gas for May delivery rose 11.3 cents (1.2%) to settle at $9.80 per million British thermal units.

Against this backdrop, May reformulated gasoline fell slightly to $2.7135 a gallon, while May heating oil dropped 4.99 cents to $2.9876 a gallon.

Crude had ended FY 2007 substantially higher by $35 or 57%. It was crude's biggest yearly gain in five years.

At the MCX, crude oil for May delivery closed at Rs 4,171/barrel, lower by Rs 133 (3.1%) against previous day's close. Natural gas for April delivery closed at Rs 387.4/mmtbu, lower by Rs 1.9/mmtbu (0.5%)

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