Oil prices retreat on US demand concerns, profit taking
NEW YORK (AFP) — World oil prices fell Monday amid heightened concerns about US economic weakness that could curb demand and as investors took profits from a run of recent record peaks.
New York's main futures contract, light sweet crude for delivery in December, sank 1.95 dollars to 95.93 dollars a barrel. It hit a record high of 96.24 dollars last Thursday.
In London, Brent North Sea crude for December delivery dived 1.59 dollars to settle at 90.49 dollars. It earlier hit a new intraday high of 92.31 dollars, topping Friday's record of 92.21 dollars.
Since October 11, when oil prices started to soar, crude has gained about 12 dollars in New York as well as London. Some analysts predict they will breach the 100-dollar level by the end of the year.
Crude futures remain underpinned by stretched global energy stockpiles, lingering geopolitical tensions and the weak US dollar, which makes dollar-priced commodities cheaper for buyers using stronger currencies.
"Crude prices were lower on profit taking (on Monday) amid continuing subprime-related negative headlines," said Sucden analyst Michael Davies.
Financial markets were spooked Monday by the resignation of Citigroup boss Charles Prince and the leading US bank's announcement it expected to write off up to 11 billion dollars in investments related to the troubled US subprime mortgage sector, where loans were given to homebuyers with weak credit histories.
"The news was yet another headline ... to persuade the market that we could see slower (oil) demand growth from the US in the days ahead," Davies added.
"Most commentators though are generally saying that while they envisage lower demand growth in the US, demand growth from China, India and Asia excluding Japan will keep markets tight."
MF Global's Michael Fitzpatrick said the price retreat was a technical correction.
"As the market closes in on the 100-dollars-a-barrel mark, there is little argument that an overbought condition exists, so a two-dollar to four-dollar correction is certainly warranted," Fitzpatrick said.
"The mindset of participants is such that any selling breaks have so far been shallow and short-lived," he added.
On the geopolitical front, tensions calmed slightly between Turkey and key crude producer Iraq.
US President George W. Bush on Monday faced crisis talks with Turkish Prime Minister Recep Tayyip Erdogan as he vies to dissuade his "war on terror" ally from an incursion into Iraq to hunt down Kurdish rebels.
Ahead of the meeting at the White House, Erdogan warned that Turkey's patience over cross-border attacks by the outlawed Kurdistan Workers' Party (PKK) was running out.
But the Bush administration, while promising US support against the PKK, is keeping up the pressure for Turkish restraint for fear of destabilizing one of the few calm zones of Iraq.
"American and Iraqi officials have been trying to keep the two sides from plunging the region into violence, and they have promised Turkey that they will try to contain cross-border attacks by the PKK," said Peter Beutel, president at energy risk management firm Cameron Hanover.
Last week, oil prices had smashed records after news of tumbling crude reserves in the United States, the world's biggest energy consumer.
Traders are on edge about US energy inventories heading into the northern hemisphere winter, when demand for heating fuel peaks.
