VIENNA, Austria – Crude oil futures prices fell more than $1 a barrel Thursday, a selloff that analysts attributed to profit-taking a day after traders tested near-record highs above $55 a barrel.
"When we failed to make a new record high yesterday, that took away some of the momentum from the bulls," said Phil Flynn, analyst at Alaron Trading Corp. in Chicago. "The market just got a little bit ahead of itself."
Analysts also said that worries about the approaching meeting of the Organization of Petroleum Exporting Countries (search) were easing as it appeared to many observers that oil ministers would keep production at present levels. Moreover, the latest U.S. government petroleum supply report showed growth in crude oil inventories and only modest declines in supplies of gasoline and distillate fuel.
Light, sweet crude fell $1.23 to settle at $53.54 a barrel on the New York Mercantile Exchange (search) and gasoline futures tumbled nearly 5 cents to $1.4831 per gallon. Brent crude dropped 72 cents to $52.66 on London's International Petroleum Exchange.
On Wednesday, crude traded in New York rose as high as $55.65 per barrel before slipping to settle at $54.77.
The highest Nymex settlement price on record is $55.17 per barrel, set twice in late October, although prices would have to surpass $90 per barrel to meet the inflation-adjusted peak set in 1980.
Victor Shum, an oil analyst at Texas-based Purvin & Gertz in Singapore, said fund traders "are looking beyond the second quarter," when demand typically slows down.
"The funds are getting ahead of the game," he said. "They are making sure they get long positions in crude."
In London, Jonathan Copus of Investec Securities suggested the downward trend was a late reaction to the most recent U.S. inventory figures.
"Crude built more than we expected, while distillates draw was less than people were expecting," he said. "The response we saw yesterday pushing up prices was a little out of step."
The recent rally has gathered pace as a steep drop in the dollar — the currency of international oil trading — spurred funds to switch money out of foreign exchange markets and into commodities such as energy, metals and coffee.
A weaker dollar generally triggers a rise in crude prices because oil is priced in that currency, making it cheaper for countries like Japan and China to buy crude.
The current bullish sentiment has been bolstered by OPEC oil ministers' signals that they will not raise output at their March. 16 meeting in Isfahan, Iran — a stance that analysts said was not surprising considering the organization already is producing over its quota.
At the same time, said Copus, there was growing consensus that OPEC countries "are not going to reign in production in this environment," taking some of the upward volatility out of the market.
OPEC officials say the cartel has about 2 million barrels a day in spare production capacity that can be quickly brought on line in the event of a surge in demand. But energy analysts say the actual figure may be closer to 1 million barrels.
In other Nymex trading, heating oil futures (search) fell 2.34 cents to $1.5091 per gallon and natural gas futures slipped 11.2 cents to $6.768 per 1,000 cubic feet.
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