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Oil prices tumble from record highs on profit taking
NEW YORK
Petroleumworld.com 10 31 07Oil prices slumped roughly three dollars Tuesday as traders took profits from a string of record highs, ahead of a US report expected to show an increase in crude stocks.
New York's main futures contract, light sweet crude for delivery in December, tumbled by 3.15 dollars to close at 90.38 dollars a barrel.
It was the first time in five consecutive sessions that the New York contract closed lower and followed a new intraday high of 93.80 dollars reached Monday.
In London, Brent North Sea crude for December delivery dropped 2.88 dollars to settle at 87.44 dollars a barrel. On Monday it had hit an all-time high of 90.49 dollars in intraday trade.
Goldman Sachs said in a research note that while it remains upbeat on longer term prices prospects for crude, it has become cautious near term and advises taking profits."We are not trying to call a top here, just take profits, as prices could continue to rise above 100 dollars a barrel in the coming weeks, but the recent strong rally will likely bring forward the short-term rebalancing of the market that we expected for the first quarter of next year," said the investment bank.
Despite Tuesday's price falls, oil prices have surged by about 50 percent over the past year. Adjusted for inflation they remain below levels reached after the 1979 Iranian revolution.
Current prices would have to go just above 100 dollars to reach outright as well as nominal highs, according to economists' calculations.
OPEC said Tuesday that its "basket" price of crude oil, based on production in 12 countries, has risen above 85 dollars a barrel for the first time.
The daily basket price jumped 1.04 dollars Monday to hit 85.84 dollars, OPEC said.
The basket price, published with a 24-hour delay, serves as the reference price for output policies of the Organization of the Oil Exporting Countries (OPEC).
OPEC, which has said that record prices reflect speculative activity in a basically well-supplied market, is due to boost output by 500,000 barrels per day from Thursday.
Crude futures were also hit by market expectations of rising energy stockpiles in the United States. The US Department of Energy publishes its weekly inventories report on Wednesday.
Analysts' consensus forecast is for a 400,000-barrel rise in crude reserves for the week ended October 26.
Barclays Capital analyst Kevin Norrish sounded a cautious note over the latest price falls.
" Although prices have fallen back thus far today (Tuesday), we see little sign as yet suggesting that the oil upward march has come to an end," he warned.
Markets were on tenterhooks to see if the US Federal Reserve will lower its base federal funds rate at the end of a two-day meeting Wednesday.
" If the Fed cuts rates again this week, the easing monetary policy is likely to continue to weigh on the dollar and continue to attract fund investment into a host of physical commodity markets, including energies," said MF Global analyst Mike Fitzpatrick.
Story from AFP 30 2125 GMT 10 07
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