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23.10.2007 Business & Finance

Oil Prices Ease Slightly

Oil prices dropped more than a $1 a barrel yesterday, extending a retreat from last week's record of above $90 a barrel as investors took profits before the contract expired.

Light, sweet crude for November delivery lost by $1.05 to $87.55 a barrel in electronic trading on the New York Mercantile Exchange by afternoon in Europe.

The contract fell by 87 cents to settle at $88.60 a barrel on Friday, after rising as high as $90.07 in earlier trading.

December Nymex crude, which becomes the front-month contract after the November contract expired on Monday, declined by $1.09 to $85.86 a barrel.

In London, December Brent crude dropped by 81 cents to $82.98 a barrel on the ICE futures exchange.
Crude prices have jumped by 28 per cent since late August despite a growing consensus among analysts that oil's underlying supply and demand fundamentals do not support such high prices.

Still, many analysts expect the declines to be temporary and believe oil futures will resume their assault on price records. They say prices are being driven by a weak dollar, speculative investing and low supplies at a key oil terminal in the U.S. Midwest.

Worries over tensions between Turkey and Kurdish rebels in northern Iraq were also a factor in lifting crude oil prices to last week's record.

On Sunday, Turkish artillery units shelled Kurdish rebel positions along the rugged Turkish-Iraqi border in retaliation for a rebel attack that killed at least 12 soldiers.

While organisations such as the International Energy Agency and the Organisation of Petroleum Exporting Countries (OPEC) warn that demand for oil would increase in the fourth quarter, many observers think the demand forecasts were overstated.

Demand for gasoline is actually falling, the U.S. Energy Department says. Domestic oil inventories are at high levels by historic standards, and grew in the week ended October 12.

Oil inventories at the Nymex delivery point of Cushing, Oklahoma, though, fell that week even as the overall supplies grew.

And falling Cushing supplies feed a perception that while overall oil supplies might be sound, it is harder to secure oil in the short term.

Nymex heating oil futures fell by 1.48 cents to $2.3158 a gallon while gasoline prices declined by 3.06 cents to $2.1381 a gallon. Natural gas futures shaded lower to $7.032 per 1,000 cubic feet.

— AP