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Oil holds above $58 per barrel

Oil prices fell for a second straight day,consolidating after touching a six-month peak.

Written by Reuters | Singapore | Published: May 12, 2009 8:52:40 am

Oil prices fell for a second straight day on Tuesday,consolidating after touching a six-month peak last week,on weaker equities and a firm dollar.

Crude prices touched $58.75 on Friday,the highest since November,after the United States shed fewer-than-expected jobs in April and government stress tests results calmed uncertainty over the health of US banks.

US crude fell 32 cents to $58.18 a barrel at 0240 GMT and London Brent crude slid 18 cents to $57.30.

“Overall sentiment is still positive. It’s a consolidation of last week’s rise to a six-month high,which is a welcomed respite. There’s some fear that it’s gone up too much,” Michelle Kwek,an analyst at Informa Global Markets in Singapore,said.

Investors took profits in equity markets this week,driving the Dow Jones industrial average down 1.8 per cent on Monday. Tokyo’s Nikkei average fell 1.4 per cent by the midday on Tuesday.

Fuelling optimism for economic recovery,Federal Reserve Chairman Ben Bernanke said the US government’s stress tests appeared to be helping banks gain access to private capital.

He also said the dollar would be strong,because the US central bank would keep inflation at bay by raising interest rates when the time is right.

The dollar was steady on Tuesday,holding onto most gains made a day earlier when it rebounded from a four-month low against a basket of currencies.

A stronger dollar is bearish for oil as it makes the commodity more expensive for holders of other currencies.

Oil has plunged from a record high above $147 a barrel hit in July,but a rally in stock markets over the last few months has helped lift US crude up almost 80 per cent from a January low of $32.70 a barrel.

Given a dearth of important economic data this week,traders will look out for US oil inventory data for some direction.

US crude stockpiles probably rose for the 10th straight time last week,up by 1.2 million barrels,while distillate stocks likely rose 1.1 million and gasoline stocks fell by 500,000 barrels,a preliminary Reuters poll ahead of weekly government inventory data released Wednesday showed.

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