Oil below $108 in Asia

Oil prices fell slightly to below $108 a barrel Friday in Asia as a traders mulled whether a weaker US dollar and signs of strong US gasoline demand justify extending a two-month rally. Benchmark crude for May delivery was down 33 cents at $107.78 a barrel at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. The contract added $1.00 to settle at $108.11 on Thursday. In London, Brent crude for June delivery was down 6 cents to $121.94 a barrel on the ICE Futures exchange. Oil prices sold off the first two days of this week, dropping from $113.46 on Monday, the highest since September 2008. However, a weaker dollar and signs US gasoline consumption remains robust helped staunch those losses and turn crude prices back upward. Crude has gained 28 percent since 15 February. "Oil bulls, with tremendous help from a feeble US dollar, have managed to regroup and claw back into the fray," energy consultant The Schork Group said. For much of the last decade, there has been a strong correlation between the dollar and oil prices. If the US currency falls, it makes dollar-based commodities such as crude cheaper for investors with other currencies. The oil/dollar correlation weakened between about October and March, but has returned this month, and on Thursday the dollar fell to a 16-month low against a basket of six major currencies. "This relationship has re-coupled, with a vengeance," The Schork Report said. "Thus, here we go again, as goes the dollar, goes oil, in the opposite direction." The euro fell slightly to $1.4449 on Friday from $1.4487 late Thursday while the dollar slid to 83.13 yen from 83.49 yen. Investors will also be closely watching the latest data on US consumer prices and industrial production scheduled to be released later Friday. "It looks to us like oil prices have had their correction," Cameron Hanover said in a report. "We continue to believe that prices will advance again to post new highs before 30 May." In other Nymex trading in May contracts, heating oil rose 1 cent to $3.20 a gallon and gasoline was steady at $3.24 a gallon. Natural gas futures were down 1.7 cents at $4.20 per 1,000 cubic feet.