NEW YORK, April 4 (UPI) -- Crude prices declined for the second consecutive day on the New York Mercantile Exchange Thursday as concerns about adequate supplies and turmoil in the Middle East appeared to fade enough to bring more sellers into the market.
Contracts for oil to be delivered during the critical summer months fell below $27 per barrel, losing 98 cents to close at $26.58. Gasoline and heating oil also fell in apparent response to bearish crude.
May heating oil was down 2.17 cents at 68.66 per gallon while May gasoline was off nearly 2.51 cents at 82.33 cents per gallon.
June crude was off 38 cents at $27.28 while July dipped 34 cents at $27.22.
Crude prices had been testing $28 per barrel earlier in the week amid escalating violence between Israelis and Palestinians. However, concerns that the Arab world would heed calls from Iraq to cut the flow of oil to the United States were downplayed by analysts and have not gotten much support from OPEC nations.
The short-term prospects for peace in the Middle East appeared to be bolstered Thursday by President Bush's latest call for a halt to Israeli incursions into the Palestinian Authority.
However, Bob Hormats, vice chairman of Goldman Sachs, said Thursday that the future direction of oil prices depended on how quickly it takes to find a lasting solution to the latest Palestinian crisis.
"If it lasts a long time and widens, then there is a growing risk of some kind of disruption of oil supplies," Hormats said in an interview on MSNBC. "I think the (politically) moderate producers don't necessarily want to have an embargo like they did in the 1970s, but there are terrorists out there who would like to disrupt oil production both to weaken the West and weaken some of these regimes, and the risk grows the longer the conflagration there lasts."
In the meantime, new supply data showed a sizable jump in U.S. crude inventories, and Venezuela announced Thursday that its crude exports would not be hampered by an ongoing dispute between the national oil company PDVSA and its oil workers' union.
That bearish sentiment apparently gave some traders with spare oil on hand the inspiration they needed to do some profit taking in the futures market.
The reversal of crude and refined products seemed to be pulling natural gas lower Thursday despite a spring cold snap over the Midwest. May NYMEX natural gas fell 17 cents to $3.333 per million BTU.
Overall sentiment for natural gas continued on the bullish side, thanks in large part to the strength of oil.
Kelley Doolan, editor of the Standard & Poor's industry publication Inside FERC's Gas Market Report, said Thursday that spot market prices were averaging $3.26 per million BTU, up nearly 43 percent from the March average.
"The huge shoulder-month jump in natural gas prices was driven by several forces, including rising oil prices, technical moves in the gas-futures contract and worries over tight supplies later this year," Doolan said in a release.
(Reported by Hil Anderson, UPI Chief Energy Correspondent)
