Oil below US$107 on stronger greenback

An oil pump works on Aug. 5, 2010, in the Persian Gulf desert oil fields of Sakhir, Bahrain. THE CANADIAN PRESS/AP, Hasan Jamali

NEW YORK, N.Y. - Oil prices settled below US$107 a barrel Friday after Saudi Arabia denied an Iranian media report of a Saudi pipeline explosion. A U.S. stronger dollar and some profit-taking after the previous day's rally were also contributing factors.

Benchmark West Texas Intermediate crude, which is used to price much of the oil produced in the U.S. Midwest, fell by $2.14 to finish at US$106.70 a barrel on New York Mercantile Exchange.

Brent crude, imported by many U.S. refineries that make gasoline, fell by $2.55 to end at US$123.65 a barrel in London.

Crude jumped to $110.55 late Thursday after an unconfirmed Iranian media report of a pipeline explosion in Saudi Arabia. Saudi officials denied the report.

Oil prices have risen from $96 last month amid fears that conflict over Iran's nuclear program could trigger a disruption in global crude supplies. Signs of an improving U.S. economy have also bolstered investor optimism and crude prices.

Iran, the world's third-largest oil exporter, faces a European embargo and other international sanctions as the West tries to force it to open its nuclear facilities to international inspectors. Some experts say Iran is trying to build a nuclear weapon, though the country denies it.

The recent jump in oil began to stall late this week. With prices near last year's highs, traders say they're increasingly worried about the consumer's ability to pay higher prices.

"These prices are beginning to bite," independent oil trader Jim Ritterbusch said. "We're at the point where people are getting concerned of further economic recovery, not just in the U.S. but much of the globe."

The American dollar rose sharply against the euro after Spain warned that its budget deficit would be worse than previously expected.

In other energy trading, heating oil fell seven cents to finish at US$3.20 a U.S. gallon (3.79 litres) and gasoline futures fell eight cents to end at US$3.27 a gallon. Natural gas futures rose two cents to finish at US$2.48 per 1,000 cubic feet.