LONDON (Reuters) –
Oil tumbled by more than $9 to near $136
a barrel in volatile trading on Tuesday on profit-taking driven
by technical factors and as fears receded that a strike by
Brazilian oil workers would hit supplies.
“This is largely profit-taking run amuck. There is no real
hard news that you can tie this to. We have seen fundamentals
weakening progressively month after month and the fall in the
stock market calls our attention to that,” said Tim Evans of
Citi Futures Perspective.
U.S. crude at one point fell by an unprecedented $9.26 a
barrel — the biggest percentage drop since December 2004 —
and by 11:50 a.m. EDT, it was $5.90 down at $139.28 a barrel.
London Brent crude fell $5.10 to $138.82.
Brazilian oil giant Petrobras said its output was back at
full capacity and would remain so until the end of the five-day
strike that started at midnight on Sunday.
“The news that Brazil’s oil production is back at capacity
despite a strike is negative for oil prices as crude earlier
rallied on prospect of lower output from there,” said Phil
Flynn, analyst at Alaron Trading.
Also weighing on prices was the cut in OPEC’s forecast for
global oil demand growth in 2008 for a fourth time this year.
The 13-member oil exporters’ group, source of two in every
five barrels of oil, said consumption would slow in 2009,
signaling a more comfortable supply and demand balance.
Oil had also eased earlier in the session as Chevron said
production had been restored at the 120,000-barrel per day
Escravos pipeline in Nigeria, resolving one of the disruptions
that have cut the African country’s supply.
Crude has risen from $20 a barrel in January 2002 to a peak
of $147.27 last week on growing demand from nations like China
and rising cash inflows into commodities from investors seeking
to hedge against inflation and the weak dollar.
The dollar fell to a record low against the euro on Tuesday
as concern about the health of the U.S. financial sector
weighing on sentiment. Investors said renewed weakness in the
U.S. currency could support oil.
Meanwhile, traders are keeping a watch on a low-pressure
weather system about 1,200 miles east of the Lesser Antilles
which may develop into a tropical depression.
Energy traders watch for storms that could enter the Gulf
of Mexico and threaten U.S. oil and gas production facilities.
The latest snapshot of supply in the United States, the
world’s top oil consumer, due for release on Wednesday, will
provide direction for prices later in the week.
A Reuters poll forecast that U.S. crude stocks fell 1.2
million barrels, gasoline inventories dropped 300,000 barrels
while distillates rose by 1.9 million barrels.
(Additional reporting by Alex Lawler and Luke Pachymuthu,
editing by Anthony Barker and James Jukwey)
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