Oil Slips for Second Day on Concern High Prices to Curb Growth

Oil slipped for a second day after the head of Saudi Arabia’s national oil company said the kingdom isn’t comfortable with prices near a 31-month high and on concern rising futures will slow the economic recovery.

Crude fell 7 cents after Khalid al-Falih, chief executive officer of Saudi Arabian Oil Co., said the world’s biggest crude exporter is committed to maintaining 3 million to 4 million barrels a day of spare capacity to stabilize the market. U.S. Treasury Secretary Timothy Geithner said today that oil prices have become an obstacle to economic growth.

“It’s no secret the Saudis don’t want prices higher, especially with a weaker dollar, because it puts the global economy into question and threatens Saudi long-term market share for energy,” said Stephen Schork, president of the Schork Group Inc. in Villanova, Pennsylvania.

Oil for June delivery settled at $112.21 a barrel on the New York Mercantile Exchange. Oil has gained 33 percent in the past year. Yesterday, futures touched $113.48, the highest intraday price since Sept. 22, 2008.

Prices declined from the settlement after the American Petroleum Institute reported at 4:30 p.m. that U.S. crude-oil stockpiles increased 4.91 million barrels to 361 million. June oil fell 49 cents, or 0.4 percent, to $111.79 a barrel in electronic trading at 4:32 p.m.

Brent crude for June settlement on the London-based ICE Futures Europe exchange rose 48 cents, or 0.4 percent, to $124.14 a barrel.

‘Not Comfortable’

“We are not comfortable with oil prices where they are today,” al-Falih said today in Seoul. “We’re concerned about the impact it could have on global economic growth.”

With crude priced in dollars, a weaker U.S. currency reduces the purchasing power of countries such as Saudi Arabia, whose economies are dependent on oil.

The dollar dropped for a sixth day against the euro, matching the longest losing streak since May 2009, on speculation the Federal Reserve will consider measures to keep yields low to support the U.S. economy. The dollar fell 0.5 percent against the euro to $1.4645 at 3:14 p.m. in New York.

Oil’s price surge has created “new headwinds” against economic growth, Geithner said today at the Council on Foreign Relations in New York. The U.S. is the world’s largest oil-consuming country. “What’s happening in oil is obviously potentially very significant,” he said.

Residential real estate prices dropped by the most in more than a year in February, a sign the U.S. housing market is struggling to stabilize, according to the S&P/Case-Shiller index of property values in 20 cities.

‘Pressured’ by Prices

U.S. Airways Group, the smallest of the U.S. full-fare carriers, posted a wider loss in the first quarter as jet fuel prices surged 33 percent, the Tempe, Arizona-based company said in a statement today. Coca-Cola Co., the world’s largest soft-drink maker, is “pressured” by rising commodity prices, Chief Executive Officer Muhtar Kent said today on a conference call.

“The fact that the housing market looks pretty lousy is making people nervous, and there are more and more stories about the effect of high oil prices on corporate earnings and on people’s summer vacations,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “There’s mild unease while people wait to see what the Fed is going to do tomorrow.”

The U.S. Federal Open Market Committee began a two-day policy meeting today. Fed Chairman Ben S. Bernanke is scheduled to speak to reporters tomorrow in his first press conference immediately after the policy meeting.

Consumer Confidence

Oil fell as much $1.16 a barrel today. It climbed as much as 36 cents after a report that U.S. consumer confidence increased more than forecast in April. Oil also rose as gasoline futures surged to a 33-month high after refineries with almost 5 percent of U.S. fuel-making capacity were knocked offline because of a power failure late yesterday in Texas City, Texas.

The Conference Board’s confidence index rose to 65.4 from a revised 63.8 reading in March, figures from the New York-based private research group showed today. The gain signaled the improving labor market is helping Americans weather rising fuel costs.

There is “significant volatility” in the market because it’s the first day European traders and others are back at their desks after a long weekend for the Easter holiday, said Jason Schenker, president of Prestige Economics, an energy advisory firm in Austin, Texas. The holiday curbed trading yesterday.

Oil volume in electronic trading on the Nymex was 407,247 contracts as of 3:18 p.m. in New York. Volume totaled 346,707 contracts yesterday, 55 percent below the average of the past three months and the lowest level this year. Open interest was 1.55 million contracts.

Crude inventories in the U.S. probably climbed 1.7 million barrels last week from 357 million in the period ended April 15, according to the median estimate of 13 analysts surveyed by Bloomberg News before a government report tomorrow. It would be the seventh increase in eight weeks.

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