Oil bubble weakens as Fed signal pause in money printing

LONDON, June 4, 2008 (AFP) – Oil prices fell on Wednesday, extending recent heavy losses made on the back of the stronger dollar, as investors awaited the latest weekly report on energy inventories in the United States. New York’s main oil futures contract, light sweet crude for July delivery, shed 59 cents to 123.72 dollars a barrel.

Brent North Sea crude for July lost one dollar to 123.58 dollars.

“Crude prices were still lower (on Wednesday), extending last night’s losses after a sudden surge in the dollar,” said Sucden analyst Andrey Kryuchenkov.

“In addition to a potentially stronger dollar, investors are still concerned about signs of flattening demand for energy due to high prices.”

The market fell sharply on Tuesday as the greenback strengthened, which tends to dampen demand because dollar-priced oil becomes more expensive for foreign buyers.

Prices slumped by almost three and a half dollars on Tuesday as the US unit surged in response to comments from US Federal Reserve chairman Ben Bernanke.

Bernanke said Fed policymakers were “attentive” to the sagging dollar because of its potential impact on inflation.

Kryuchenkov added: “The US central bank is starting to focus on infla