WASHINGTON - Oil prices rose slightly on Friday but finished the week down 4.5 percent due to rising U.S. supplies, slower demand growth in China and a strengthening dollar.
Crude oil futures are now almost $10 below last month's peak and brokers said prices could slip further in the weeks ahead if speculators bail out of the market. They cautioned that if prices drop too sharply, perhaps to below $45 a barrel, the Organization of Petroleum Exporting Countries might begin to consider a production cut.
Saudi Arabia's oil minister Ali Al-Naimi is scheduled to speak in Washington on Tuesday about global supply and demand.
After falling as low as $47.75, light, sweet crude for June delivery settled 13 cents higher at $48.67 a barrel on the New York Mercantile Exchange.
Still, oil prices are $2.29 lower than a week ago following sharp declines on Wednesday and Thursday, and the stock prices of major oil producers and refiners are well off their highs.
"It does seem that demand is not as robust as previously thought," said Andrew Lebow, senior vice president at Man Financial Inc. in New York. Moreover, the commercial supply of crude oil in the United States is at its highest level since March 2002 and, from a technical trading standpoint, all charts indicate that prices are headed even lower in the near-term.
Lebow said, however, "it's way too soon to say that the market has turned from a long-term bull to a long-term bear."
Analysts said slumping SUV sales indicate that consumers are becoming sensitive to the high price of motor fuel, though they concede that the impact on daily gasoline demand will be marginal in the short-term.
Following the slide in oil prices, retail gasoline prices are 9 cents below last month's peak, averaging $2.19 a gallon nationwide.
Nymex gasoline futures dropped 1.98 cent to $1.4122 per gallon on Friday, while heating oil futures declined by less than a penny to $1.3703 per gallon.
On London's International Petroleum Exchange, June Brent crude futures rose 32 cents to $48.66 per barrel.
At their peak in early April, oil prices were 67 percent higher than a year earlier, now they are about 18 percent higher than a year ago.
"You can only bet so long that supplies are going to grow tight," said James Cordier, president of Liberty Trading Group in Tampa, Fla.
"When we were racing toward $60 a barrel, it was mostly speculative driven. Certain people were calling for $90 and $100 crude and the public was pouring money into commodity funds," Cordier said. "As those positions lighten up, it could bring us to the $45 level... There's still a little fluff in the market."
One catalyst for the decline in oil prices has been the rise of the dollar, which was up for a third straight day on Friday against major currencies. The dollar's rise drove the euro down to $1.2631. That's the lowest the euro has been against the dollar since mid-October.
As for oil, the downward momentum began Wednesday when the U.S. Energy Department said domestic crude inventories grew by 2.7 million barrels last week to 329.7 million barrels, or 10 percent above year-ago levels. Crude inventories have been building steadily for the past three months.
Also on Wednesday, the Paris-based International Energy Agency said oil demand in China rose 4.5 percent in the first quarter, a sharp decline from the 19.3 percent year-on-year jump in the first three months of 2004. China is the world's second-largest consumer of crude behind the United States, and rapidly increasing demand there has been blamed for dwindling supplies.
Vienna's PVM Oil Associates said in its daily energy market report that prices could slide to the lower $40s. "But summer driving and winter heating demand, as well as tight up- and downstream capacity in the third and fourth quarters should combine to return levels to $50 again, if not higher, particularly if there are any outages or other supply related problems."
In London, Deutsche Bank analyst Adam Sieminski also said crude would probably trade between $40 and $50 a barrel into summer.
Prices are "going to go down as far as the Saudis are comfortable with and they will stop when the Saudis become uncomfortable," he said.
Associated Press Writer George Jahn in Vienna contributed to this report.