NEW YORK (AP) _ Oil futures traded in a narrow range Thursday as the dollar stabilized against the euro, giving energy investors a reason to take profits from the previous session's big rally.
An overnight attack on an oil pipeline in Iraq raised some supply concerns, sending prices higher at times.
Retail gas prices, meanwhile, inched up overnight while diesel prices slipped.
The uncertain trading in oil futures came as the dollar rose slightly against the euro, reversing a relationship that send oil futures surging nearly $5 on Wednesday. A stronger dollar makes hard assets such as energy commodities less attractive as a hedge against inflation than when the greenback is falling. Exacerbating the impact of foreign exchange moves, oil futures are priced in dollars, making them more expensive to investors overseas when the greenback rises.
"They're mirroring each other extremely closely," said James Cordier, founder of OptionSellers.com, a Tampa, Fla., trading firm, of the dollar's relationship to oil prices. "That's still the driving force."
Light, sweet crude for May delivery fell 4 cents to $105.86 a barrel on the New York Mercantile Exchange, but alternated frequently between gains and losses.
Early Thursday morning, oil prices shot to nearly $108 on word of the Iraqi pipeline attack. Iraqi oil officials said the attack and ongoing clashes in Basra would not affect oil exports, but investors are clearly unnerved by several days of fighting in the area.
Iraq's average crude production in February was 2.4 million barrels per day, of which an average of 1.54 million barrels a day moved through Basra.
Still, analysts said prices jumped much less on the Iraq news than they would have if the dollar had been declining.
"The reaction so far in the futures markets has been relatively muted," said Addison Armstrong, director of market research at Tradition Energy in Stamford, Conn. "Strength in the dollar, it appears, is helping to momentarily keep a lid on further rallies."
Thursday's economic news provided energy investors little in the way of fresh direction. The Commerce Department said gross domestic product, a measure of economic growth, grew at an annual rate of 0.6 percent in the fourth quarter, in line with analyst expectations, while the number of people signing up for unemployment benefits fell slightly.
At the pump, meanwhile, gas prices rose 0.6 cent Thursday to a national average of $3.267 a gallon, according to AAA and the Oil Price Information Service. Diesel prices slid 0.5 cent to a national average of $4.022 a gallon.
Both fuels have followed oil's recent surge higher, and remain near recent records. High gas prices are pressuring consumers already buckling under the effects of high food prices, falling home values and tight credit markets.
The Energy Department expects gas prices to peak near $3.50 this spring as suppliers stock up in advance of peak summer driving season. Many analysts think prices will rise even higher than that.
In other Nymex trading Thursday, April heating oil futures rose by 3.97 cents to $3.0835 a gallon, while April gasoline futures slid by 4.25 cents to $2.7004 a gallon.
April natural gas futures fell by 13.2 cents to $9.44 per 1,000 cubic feet. The Energy Department, in its weekly inventory report, said natural gas supplies fell last week by 36 billion cubic feet, less than analysts surveyed by Dow Jones Newswires had expected.
In London, Brent crude gained 16 cents to $104.15 a barrel on the ICE Futures exchange.
Associated Press writers George Jahn in Vienna and Gillian Wong in Singapore contributed to this report.
Copyright 2008 The Associated Press.