Oil falls on profit-taking after record surge

NEW YORK - Oil fell from record highs on Monday on profit-taking after surging an unprecedented $16 in the previous two sessions.

By (Reuters)

Published: Mon 9 Jun 2008, 11:58 PM

Last updated: Sun 5 Apr 2015, 1:07 PM

The slide came after oil jumped nearly $11 on Friday alone as the dollar weakened and on forecasts of falling inventories in the United States and weak supply.

U.S. crude CLc1 traded down $2.54 to $136.00 by 12:57 p.m. EDT (1657 GMT), off the record high $139.12 hit on Friday. London Brent crude LCOc1 dropped $2.45 to $135.24.

"After the market rallies by $16 you've got to put some money in the bank," said Nauman Barakat, senior vice president at Macquarie Futures USA.

Oil has surged more than 40 percent this year as investors pour into commodities to hedge against the weak dollar and inflation.

The rise of investor flows has added to a six-year rally sparked by concerns demand from emerging economies such as China would outpace supply growth, sending oil prices up seven-fold since 2002.

A forecast from Morgan Stanley that the diversion of Middle East crude away from the United States to Asia should draw down inventories in the world's top consumer and send prices to $150 a barrel by July 4 helped spark last week's late rally.

Goldman Sachs said production declines from Mexico, Russia, Venezuela and the North Sea were supporting prices.

"Evidence of a structural decline in supply are mounting," the bank said in a Monday report. "The higher than expected decline rates in these critical regions are already contributing to keep U.S. import levels extremely low, ultimately tightening U.S. oil fundamentals."

The dollar strengthened on Monday after plunging on Friday after U.S. data showed the biggest jump in the unemployment rate for 22 years, denting expectations the Federal Reserve would raise interest rates.

Meetings and protests

Skyrocketing fuel costs have already begun to erode demand in consuming nations such as the United States and Britain, and moves by emerging economies like India and Malaysia to cut fuel subsidies could also dent demand, analysts warn.

Ministers from oil cartel OPEC insist there is enough in the market, and blame rising prices on speculators. Saudi Arabia Oil Minister Ali al-Naimi said at the weekend the current price rise was unjustified, the official Saudi Press Agency reported.

The Cabinet of the top oil exporter said on Monday it will call for a meeting between producing and consuming nations to discuss prices. nL09431870

High oil prices have sparked protests around the globe, from the United States to Europe to India and Indonesia. nL09547528

OPEC President Chakib Khelil on Monday said that but for the weak dollar, political tensions and speculation, oil prices would probably be around $70 a barrel. nL09201455

"In terms of fundamentals, there is no problem of supply and demand. There is much more a bubble due to speculation, which is based on a depreciating dollar and geopolitical tensions," Khelil was quoted by Algerian official news agency APS as saying.

More news from Business