LONDON — Oil dipped below $105 a barrel Thursday in Europe on expectations that Western nations will release some crude reserves to push energy costs lower.
Benchmark oil for May delivery was down 63 cents to $104.78 by early afternoon European time in electronic trading on the New York Mercantile Exchange. The contract fell $1.92 to settle at $105.41 per barrel in New York on Wednesday. Brent crude for May delivery was steady down 21 cents at $123.95 per barrel in London.
France's prime minister said Thursday that he there was "a good chance" that the United States and Europe will agree to release oil reserves into the market to drive down crude prices.
U.S. officials denied a report several weeks ago that said the U.S. and Britain were planning a coordinated reserves release. France confirmed this week that the talks were ongoing and that it was part of them.
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The stock release would seek to lower prices, which have been driven higher in recent months by fears that a potential military attack by Israel or the U.S. on Iran's nuclear facilities would disrupt crude supplies. Analysts worry that a further spike in crude prices will spark inflation and hurt consumer spending.
Fitch Ratings estimates that if Brent averaged $150 this year, it would cut global economic growth by 0.4 percent in 2012 and 2013.
"Inflation would substantially increase, eventually depleting household income levels and consumption," Fitch said in a report.
A large jump in U.S. crude supplies also weighed on oil prices. The Energy Department's Energy Information Administration said Wednesday that crude inventories soared 7.1 million barrels last year, more than double the amount forecast by analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos.
Natural gas prices, however, fell to a 10-year low amid a glut of U.S. supplies. Some analysts say the U.S. could soon run out of natural gas storage space.
In other energy trading, heating oil was down 0.7 cents at $3.20 per gallon and gasoline futures rose 1 cent to $3.41 per gallon. Natural gas dropped 2.4 cents to $2.26 per 1,000 cubic feet.
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