Oil Prices Fall Dip Below US$70

Crude Oil futures turned higher Friday in electronic trading after falling nearly $5 a barrel earlier this week on U.S. government data that showed an increase in gasoline supplies.

Gas prices gained 1.79 cents to $2.1025 per gallon.

Prices had plunged $2.33 Wednesday after the U.S. Energy Department released its weekly report showing a supply rise as refineries boost output and demand flattens.

The report showed that over the past four weeks, average daily gasoline demand in the United States was 9.127 million barrels per day, barely higher than year-ago demand of 9.125 million barrels a day.

It also showed that domestic inventories of gasoline climbed by 2.1 million barrels, reversing eight straight weeks of declines.

Many analysts believe the government data point to a consumer response to U.S. pump prices that exceed $3 a gallon in many parts of the country.

While Nymex oil futures have fallen more than $4 from their intraday peak of $75.35 reached April 21, prices remain roughly 40 percent higher than a year ago and analysts do not expect them to free-fall anytime soon given the high level of geopolitical tensions.

The most pressing source of anxiety in the market stems from the possibility that Iran could cut supplies because of international pressure to modify its nuclear program. Unrest in Nigeria, violence in Iraq and rising resource nationalism in South America have added to oil market worries.

Some 500,000 barrels per day of Nigerian production, most of it operated by Royal Dutch Shell PLC, remains off-line because of violence there, and more than 300,000 barrels per day remains shut down in the Gulf of Mexico since Hurricane Katrina battered offshore platforms in August.

Strong global demand and a limited supply cushion magnify the significance of these events, while a surge of investors betting on oil and other commodities has also lifted prices.