Pipeline repair causes oil to drop
By GEORGE JAHN Associated Press Writer

VIENNA, Austria (AP) - Oil prices fell Friday on word that a key Iraqi oil pipeline will likely be repaired later in the day.Dow Jones Newswires quoted a South Oil Co. official as saying the pipeline would be fixed by Friday night. The pipeline's bombing on Thursday helped push oil prices up sharply.

New evidence the economy is edging toward recession also weighed on oil prices Friday. The Commerce Department said consumer spending edged up by just 0.1 percentage point in February. While in line with analyst expectations, that was the weakest performance since September 2006.

Energy investors worry that a slow economy will demand less crude oil and fuel.

Light, sweet crude for May delivery fell 83 cents to $106.75 a barrel on the New York Mercantile Exchange. The contract rose $1.68 to settle at $107.58 a barrel on Thursday.

Despite the prospect of a quick repair to the Iraqi pipeline, Thursday's attack was the second bombing of a pipeline in a week in Basra, where Iraqi security forces have been clashing with Shiite militia fighters. Experts said the ongoing violence, while escalating rapidly, was not expected to result in huge disruptions to Iraqi oil exports.

"The government's and the U.S. forces' ability to keep insurgents from penetrating the actual oil fields and damaging production facilities has not been rocked, although the current level of violence appears to be the highest ever since the 2003 U.S.-led invasion," wrote Samuel Ciszuk of consulting firm Global Insight in a research note.

However, Ciszuk added, "temporary shut-ins of 100- 200,000 (barrels a day) should not be ruled out in the coming week."

The news from Iraq added to supply concerns stoked Wednesday when a U.S. government agency reported that domestic crude oil inventories were mostly unchanged last week, while fuel supplies fell more than expected.

"Wednesdays DOE report and Thursdays headline out of Basra helped ignite the crude and heating oil pits," noted Stephen Schork, in his daily Schork Report.

The supply issues temporarily drew attention from the dollar, which rose slightly against the euro Thursday, reversing a trend that sent oil futures surging nearly $5 the day before.

A stronger dollar makes hard assets such as energy commodities less attractive than when the greenback is falling. Oil futures are priced in dollars, making them more expensive to investors overseas when the greenback rises.

Also, a strengthening dollar lessens the need to use crude oil and other hard commodities as hedges against inflation.

Analysts, though, expect the dollar to resume its decline against foreign currencies because the Federal Reserve is expected to cut interest rates several more times this year.

In other Nymex trading, April heating oil futures fell 2.58 cents to $3.1225 a gallon while April gasoline futures fell 0.34 cent to $2.7129 a gallon. May natural gas futures rose 5.9 cents to $9.746 per 1,000 cubic feet.

Brent crude futures slipped by 48 cents to $104.52 a barrel on the ICE Futures exchange in London.

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AP Business Writer John Wilen in New York and Associated Press writer Gillian Wong in Singapore contributed to this report.