Crude oil falls 2 pct as Libyan production returns, dollar strengthens

The price of oil dropped 2 per cent Thursday on expectations of higher global supplies and the impact of a strengthening dollar.

U.S. benchmark oil for February delivery was down $2.07 to $96.35 in midday trading in New York. Markets were closed Wednesday for New Year’s Day.

Brent crude, a benchmark used to price international crude used by many U.S. refineries, was down $1.83 to $108.77 per barrel.

U.S. oil was lower for the third straight day after closing above $100 per barrel Friday for the first time since October. The price had been rising on growing consumption in the U.S. as the economy improves.

But reports that an end to protests at a major Libyan oil field could return 300,000 barrels of daily production to the global market raised expectations that supplies would be ample.

Brighter prospects for the U.S. economy have helped boost the value of the dollar. A stronger dollar makes commodities such as oil that are priced in dollars more expensive to buyers using other currencies. That lowers demand, and prices.

“Further improvement in the U.S. economy should be supportive of the U.S. dollar and that will continue to play against oil demand in emerging markets,” said Olivier Jakob, an analyst at Petromatrix in Switzerland. He highlighted recent protests in Kuala Lumpur, Malaysia, against rising gasoline prices.

The U.S. national retail gasoline price rose less than a penny to $3.33 per gallon, according to AAA, OPIS and Wright Express. The price has climbed 6 cents per gallon over the past week and is 4 cents higher than a year ago.

In other energy futures trading:

— Wholesale gasoline fell 5.4 cents to $2.732 a gallon.

— Natural gas futures rose 7.1 cents to $4.263 per 1,000 cubic feet.

— Heating oil fell 5.5 cents to $3.010 a gallon.

AP writer Pablo Gorondi contributed to this report from Budapest.