Oil Prices Briefly Fall Below $70

Tourists riding a "scootcar" zip past a sign advertisiing gas prices, Thursday, Aug. 17, 2006, in Friday Harbor, Wash., on San Juan Island. Oil hovered near $70 a barrel on Thursday, dropping more than a dollar, as traders responded to a report of above-average U.S. oil stockpiles and a lack of bad news to drive prices higher. (AP Photo/Elaine Thompson) (Elaine Thompson - AP)

LONDON -- Oil prices briefly dipped below $70 a barrel during trading Friday for the first time in almost two months after a wave of good news in the Middle East and from an Alaskan oil field.

Late Friday morning in New York, light, sweet crude for September delivery fell as low as $69.60 a barrel _ a level not seen since June 21 when oil reached a low of $68.80. Prices later climbed to $70.05, down a penny from Thursday's close, in electronic trading on the New York Mercantile Exchange.

At London's ICE Futures exchange, Brent crude for October rose 62 cents to $72.20 a barrel.

In other Nymex trading, gasoline futures gained 2.34 cents to $1.9550 a gallon. Heating oil futures rose 1.1 cents to $1.9760 a gallon, while natural gas futures dropped 10.9 cents to $6.590 per 1,000 cubic feet.

Analysts noted that prices tend to push lower near a contract's expiration and rebound after. Options for the September crude contract expired Thursday. Futures expire next Tuesday.

"We've been seeing this pattern since the beginning of the year," Phil Flynn, an analyst at Alaron Trading Corp. in New York, said Thursday. "We have a lot of risk premium built into the price of oil and as the expiration closes in, the premium starts to unwind."

Prices had hit a record high of $78.40 a barrel on July 14, two days after fighting erupted in Lebanon. But prices have steadily fallen this week as supply fears abated after a cease-fire held in Lebanon and BP PLC resumed partial production at its Prudhoe Bay oil field in Alaska.

"Generally speaking, we have a chance to hold at $70 a barrel," said Raymond Mazzeo, vice president at Energy Merchant LLC. "But I'm near-term bearish. I'm looking for another $5 to $10 to come out of the front month in coming weeks."

Concerns about supply disruptions in Nigeria due to civil unrest are lingering in the market, as are worries over the standoff between the United Nations and Iran over its nuclear program. Iran has said it will respond by Aug. 22 to an offer of incentives in exchange for a pledge to suspend uranium enrichment.

Oil traders are also watching weather patterns for potential hurricanes that could strike Gulf of Mexico refineries, as well as signals for where fuel demand is headed.