Oil falls below $145, awaits Iran response
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LONDON (Reuters) - Oil dropped below $145 a barrel on Friday, but was still within sight of record highs reached in the previous session when traders bought into the market ahead of a holiday weekend in the United States.U.S. crude oil was down $1.40 at $143.89 a barrel by 6:47 a.m. EDT, below an all-time high of $145.85 hit on Thursday. The contract has risen more than 50 percent this year.London Brent was down $1.19 at $144.89.Prices fell more than a dollar after Iran said it would make a response later on Friday to proposals from six world powers to try to resolve a long-running dispute over its nuclear development program.The United States, China, Russia, Germany, Britain and France have offered trade and other incentives to Iran, which is facing sanctions because it has refused to give up its nuclear program.Investors have rushed into crude oil ahead of the U.S. independence day holiday on July 4, because they are wary of any escalation in tensions between Iran and Israel that have contributed to oil's rise to a record of $145.85 this week.Oil has risen about 50 percent this year, driven partly by the tensions over Iran's nuclear program, plus expectations that global oil supplies will not be able to cope in the long term with strong demand growth from newly industrializing China and India.The price spike has caused fuel protests worldwide and has begun to dampen demand in consuming nations, including the United States, the world's biggest energy consumer.The next milestone is $150 a barrel, which some analysts had predicted the market could reach by July 4."It's going to go higher before it goes lower," said Christopher Bellew, of Bache Financial."Two trains are rushing towards each other. One is ... rallying oil prices and the other is economic recession. At some point they are going to collide."Investment flows into oil have contributed to the price surge, encouraged by commodities' strong returns this year versus a feeble showing from equities."I think the current market is driven by speculative money, not by fundamentals," said Takeda Makoto, an analyst at Bansei Securities.The weak U.S. dollar has also played a part in boosting oil, which is priced in the U.S. currency.The dollar drew some support on Friday after European Central Bank President Jean-Claude Trichet appeared to play down chances of further interest rate rises.(Reporting by Baizhen Chua and Annika Breidthardt in Singapore, Jane Merriman in London) (c) Reuters 2008. All rights reserved. Republication or redistribution of Reuters content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters and the Reuters sphere logo are registered trademarks and trademarks of the Reuters group of companies around the world.
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