NEW YORK Oil futures fluctuated Tuesday as traders awaited significant news that could help the market break out of a trading range that has lasted for more than two weeks. Retail gas prices, meanwhile, slid below a national average of $4.07 a gallon.
Some investors were buying in response to another drop in the dollar. When the dollar loses ground, crude and other commodities tend to rise on their appeal as a hedge against inflation. Also, a weaker dollar makes oil less expensive to investors dealing in other currencies. Many analysts believe the dollar's protracted decline has been one of the main reasons oil has nearly doubled in value over the past year.
But any gains Tuesday were being limited by concerns about the impact high prices are having on demand, and worries about Congress' increasing scrutiny of the oil market.
In a weekly report, MasterCard's SpendingPulse survey found that demand for gasoline fell 2.7 percent last week compared to the same week last year, and is off by an average of 3.6 over the last four weeks compared to the same period in 2007.
Light, sweet crude for August delivery fell 55 cents to $136.19 a barrel on the New York Mercantile Exchange, but occasionally rose into positive territory.
Prices drew some support from recent production outages in Nigeria. But reports of an oil workers strike, which helped push prices higher on Monday, were denied by Babatunde Ogun, president of Pengassan, Nigeria's white-collar oil union.
"There's no strike," Ogun said. "We're trying to settle the matter."
Ogun said talks continued Tuesday among his union, Chevron Corp. and government mediators in Nigeria, Africa's largest oil producer and a major U.S. supplier.
Separately, a government-appointed mediator charged with leading a peace conference on Nigeria's oil region called Tuesday for a 90-day truce in the area. On Sunday, the region's main militant group has said it will not attend the conference, but announced a unilateral cease-fire.
OPEC President Chakib Khelil insisted Tuesday that oil producers saw no need to raise supply, blaming high prices on factors such as U.S. pressure on Iran over its nuclear program and the weak dollar. Khelil's comments came days after Saudi Arabia disappointed the crude futures market by saying it would boost production less than many had hoped.
Another support for prices came from new sanctions against Iran approved by European Union nations, imposing additional financial and travel restrictions on a list of Iranian companies and experts including the country's largest bank. The 27-nation bloc stopped short of banning oil and gas exports from Iran, OPEC's second-largest producer, in response to its nuclear program plans.
A litany of recent reports from the Energy and Transportation departments has offered concrete evidence American consumers are driving less in response to high prices. At the pump, the average price of a gallon of regular gas slipped 0.3 cent overnight to $4.069 a gallon, according to a survey of stations by AAA, the Oil Price Information Service and Wright Express. Still, prices are $1.09 higher than a year ago.
"We're seeing demand deterioration in the U.S.," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Ill.
Vienna-based JBC Energy predicted U.S. gasoline demand will fall 1.7 percent this year compared to 2007, citing Department of Transportation reports showing that U.S. vehicular traffic fell by 2.1 percent between January and April of this year compared to the same period last year.
Increased scrutiny of oil trading practices is keeping some potential investors on the sidelines, analysts said. At least nine bills aimed at curbing speculation in oil contracts have been introduced in Congress in recent weeks. Michael Masters, managing member of hedge fund Masters Capital Management told Congress Tuesday that eliminating excessive speculation could lower oil prices to around $65. But pension fund managers testifying Tuesday said high prices are not their fault, arguing that pension funds place less than 1 percent of their assets in commodities.
In other Nymex trading Tuesday, July gasoline futures rose 0.09 cent to $3.456 a gallon, and July heating oil futures rose 1.54 cent to $3.8118 a gallon. July natural gas futures fell 25.2 cents to $12.951 per 1,000 cubic feet.
AP Business Writer Matthew Perrone in Washington, Associated Press writers Edward Harris in Lagos, Nigeria, Bashir Adigun, in Abuja, Nigeria, Aoife White in Brussels, Belgium, George Jahn in Vienna, Austria, and Gillian Wong in Singapore contributed to this report.