Oil eases to $102 after record rally

LONDON Fri Feb 29, 2008 10:36am EST

An oil tanker in a file photo. Oil vaulted more on Thursday to an all-time peak near $103 -- eclipsing the previous inflation-adjusted high set 28 years ago. REUTERS/File

An oil tanker in a file photo. Oil vaulted more on Thursday to an all-time peak near $103 -- eclipsing the previous inflation-adjusted high set 28 years ago.

Credit: Reuters/File

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LONDON (Reuters) - Oil fell more than $1 to stand under $102 a barrel on Friday, stepping back from a record high reached due to supply disruptions and as a weak dollar encouraged investors to buy commodities.

The latest jump, which sent U.S. crude above the inflation-adjusted high of $102.53 hit in 1980, followed the shutdown of an oil pipeline in Ecuador and a fire at a European natural gas plant.

"Some profit taking could lead to lower prices today," said Frank Schallenberger, analyst at Landesbank Baden-Wurttemberg in Stuttgart, Germany.

U.S. crude was down $1.03 at $101.56 a barrel by 10:07 a.m. EST after hitting a record $103.05 earlier in the session. London Brent crude dropped $1.04 cents to $99.86, off its record high of $101.27.

The Trans-Ecuadorean pipeline, which pumps most of the oil extracted by Petroecuador in the Amazon forest to ports on the Pacific Ocean, was shut after a landslide punctured it.

Ecuador declared a force majeure on oil exports to prevent any delays on shipments, although Oil Minister Galo Chiriboga told Reuters that oil exports so far have not been disrupted.

Ecuador is OPEC's smallest producer, pumping 500,000 barrels per day. The pipeline was handling around 150,000 bpd.

Oil surged on Thursday after a fire at Royal Dutch Shell's (RDSa.L) Bacton gas terminal in Norfolk, England, shut more than 45 million cubic meters per day of gas supplies, about 13 percent of the UK national grid's forecast demand.

Shell said the fire had been extinguished and the plant had been shut down safely. It remained shut on Friday.

Some analysts say the plunging dollar, which hit an all-time low on Friday against the euro, has encouraged investors to pour money into commodities as a hedge against inflation.

Also adding support, the Organization of the Petroleum Exporting Countries is unlikely to raise oil output at a meeting on March 5, rebuffing a call from top consumer the United States for more supply.

Analysts who use past price movements to predict future direction said oil could head higher.

"Commodity markets have taken off across the board and, at this point, there is no sign that a top is in place," Barclays Capital technical analysts said. "In the near term, above $103, gains are likely to extend to 104.50."

(Additional reporting by Luke Pachymuthu in Singapore and Santosh Menon in London, editing by Anthony Barker)

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