The Statue of Liberty stands in New York Harbor with an oil storage facility behind it, Tuesday, March 15, 2011 in New York. Oil prices fell sharply Tuesday on deepening fears about Japan's economy after its nuclear crisis worsened following a devastating earthquake and tsunami.(AP Photo/Mark Lennihan)
NEW YORK (AP) — Oil prices fell sharply Tuesday on deepening fears about Japan's economy after its nuclear crisis worsened following a devastating earthquake and tsunami.
Potentially dangerous levels of radiation have been reported leaking from a crippled nuclear complex in the disaster area. More than 10,000 people are thought to have died after the earthquake and tsunami hit Japan on Friday.
Investors worried about diminished demand for oil and other products in Japan, the world's third-largest oil importer. However, Wall Street analysts expect that Japan will eventually increase imports of oil, coal and natural gas.
Royal Dutch Shell PLC said Tuesday that it will send liquefied natural gas and fuel oil to Japan to help meet power shortages. Japan produces about 28 percent of its energy from coal-fired power plants, but can also run some generators on LNG and even crude oil. Fifty-four nuclear reactors provide about 25 percent of the country's power. Four of those reactors are in the nuclear plant that leaked radiation.
Benchmark West Texas Intermediate crude for April delivery dropped $2.73, or 2.7 percent, to $98.46 per barrel on the New York Mercantile Exchange after dipping below $97 a barrel earlier in the day.
Brent crude fell $3.17, or 2.8 percent, to $110.50 per barrel on the ICE Futures exchange.
The uncertainty over how long it could take Japan to recover triggered a sell-off in other commodities as well, as stocks markets fell around the world. Many investors bought assets considered to be safer to hold during uncertain economic times, such as the dollar.
The Dow Jones Industrial Average lost nearly 300 points before regaining ground. It was down 189 points in afternoon trading. The Standard & Poor's 500 index and the Nasdaq composite index also were lower.
Meanwhile, the U.S. Dollar Index, which tracks the greenback versus other major currencies, rose nearly 1 percent.
Investors likely were buying the dollar because of its relative safety until there is more clarity about Japan's future, said Tom Kloza, publisher and chief oil analyst at Oil Price Information Service.
Oil, which is priced in dollars, tends to fall as the dollar rises and makes crude barrels more expensive for anyone holding foreign currency.
After a rise in oil prices like the world saw this month "we were due for a sinkhole day like this," Kloza said.
Oil prices are still higher than they were in mid-February when uprisings in Libya shut down that country's oil production and sent benchmark crude from about $85 a barrel to more than $105 a barrel last week, its highest level since September 2008. Libya produced only about 2 percent of the world's crude. Prices rose however on concerns that unrest would spread to bigger producers like Saudi Arabia. Troops from Saudi Arabia and other Arab nations are in neighboring Bahrain to help keep order as anti-government protests continue there.
Kloza and Tom Bentz, director of BNP Paribas Commodity Futures Inc., think oil prices will fall further because of ongoing concerns about Japan.
Bentz speculated prices could fall as low as $95 a barrel in coming weeks. "It's going to be a while before Japan is able to recover from this and the market is starting to price that in," he said.
Gasoline pump prices across the U.S. fell slightly Tuesday for the first time in nearly a month to a national average of $3.556 per gallon. Prices are still higher than ever for this time of year. A gallon of regular is 42.8 cents more expensive than a month ago and 76.6 cents higher than last year.
In other Nymex trading for April contracts, heating oil fell 7 cents to $2.9898 per gallon and gasoline futures lost 13 cents at $2.8323 per gallon. Natural gas rose 3 cents to $3.945 per 1,000 cubic feet.
AP Business Writer Toby Sterling in Amsterdam contributed to this report.