Oil prices steady above $127 a barrel in Asia

Oil prices held steady around $8 below the record hit last month as investors tried to determine if the market's yearlong bull run is over.

Jitters that record high fuel and energy prices are cutting into demand - particularly in the U.S., which has just started its summer driving season - helped to pull oil off the $135.09 a barrel trading record hit May 22. At the same time, worries that supplies in the near-term won't be able to keep up with demand growth in Asia have kept a floor underneath prices.

Many analysts say institutional investors and fund managers still view any retreat of $5-$10 as a buying opportunity.

Midday in Singapore, light, sweet crude for July delivery was up 9 cents at $127.44 a barrel in electronic trading on the New York Mercantile Exchange. On Friday, the contract settled at $127.35 a barrel, up 73 cents.

At one point Friday, July crude futures dipped below $125 a barrel before rebounding.

In the U.S., high prices are cutting demand for gasoline, with data from the Energy Department and Federal Highway Administration and several surveys in recent days suggest American consumers are driving less.

Additional selling pressure came last week from a Commodity Futures Trading Commission investigation into possible price manipulation in oil futures markets. The CFTC also announced new rules designed to increase transparency of U.S. and international energy futures markets.

Also, the dollar, with some fluctuations, seems to be regaining a footing. In early afternoon Asian currency trade in Tokyo, it was holding above 105 yen, while the euro was changing hands around $1.5536.

Investors who buy commodities such as oil as a hedge against inflation when the greenback weakens, tend to turn around and sell when the currency gains ground. Also, a stronger dollar makes oil more expensive to investors overseas.

On a trip to the Mideast over the weekend, U.S. Treasury Secretary Henry Paulson said there is "no quick fix" to high oil prices because it is an issue of supply and demand. He was on the trip to deliver a message to officials of Saudi Arabia and other oil-producing nations that soaring oil prices are putting a burden on the global economy.

Global demand remains strong while "production capacity has not seen new development," Paulson said Sunday in Qatar. His trip was designed to urge Mideast producers to allow more outside investment to boost output.

The day before, though, the current president of the Organization of Petroleum Exporting Countries again blamed the weak U.S. dollar, speculation and the subprime crisis for the spiraling price of oil.

Algerian Energy Minister Chakib Khelil said the cartel will make no new decision on production levels until its Sept. 9 meeting in Vienna. He said oil's record prices do not reflect markets conditions, an oft-repeated OPEC position.

In other Nymex trading, heating oil futures rose 0.18 cent to $3.6685 a gallon while gasoline prices added 0.62 cent to $3.3544 a gallon. Natural gas futures rose 4.2 cents to $11.745 per 1,000 cubic feet.

July Brent crude futures were flat at $127.78 a barrel on the ICE Futures exchange in London.