Oil prices drop as dollar rises against euro

Crude oil fell on the global market by 2 US dollars to sell at 12.80 US dollars on Friday

Oil prices dropped more than 2 US dollars a barrel Friday on the international market as the U.S. dollar rose against the euro.

Light and sweet crude for May delivery on the New York Mercantile Exchange was down by 2.06 to 112.80 US dollars a barrel in electronic trading by Friday afternoon in Europe.

On Thursday, the May contract rose to a record 115.54 dollars as the dollar fell to a new low against the euro.

In London, Brent crude futures dropped by 76 cents to 111.67 dollars a barrel on the ICE Futures exchange.

A host of supply and demand concerns in the U.S. and abroad, as well as the depreciating dollar, had pushed crude prices up more than 4 per cent last week.

Investors have been buying oil contracts as a hedge against the weakening dollar, betting that rising commodity prices will offset dollar declines.

But on Friday, the dollar rose slightly, after falling to an all-time low against the euro, which peaked at 1.5982 dollar. The euro stood at 1.5830 dollar in Europe last Friday.

«Oil has been taking so widely its directional clue from the dollar that when the dollar does not move, oil does not know where to go,» Olivier Jakob of Petromatrix in Switzerland said in a report.

Traders were also keeping an eye on unrest in Africa’s biggest crude producer. A militant group in Nigeria said it had sabotaged a major oil pipeline operated by a Royal Dutch Shell PLC joint venture and promised further attacks on the country’s petroleum industry.

A spokesman for Shell had no immediate comment on any attack. Attacks since early 2006 on oil infrastructure by the Movement for the Emancipation of the Niger Delta have cut nearly one quarter of Nigeria’s normal petroleum output, boosting oil prices.

The militants say they are fighting to force the federal government to send more oil industry revenue to their areas, which remain desperately poor despite decades of oil production.