Oil falls from record near $106 on profit-taking
NEW YORK (Reuters) - Oil prices fell on Thursday as traders took profits from a record rally near $106 a barrel that was fueled by the weak dollar and OPEC's decision to hold crude output steady.
Strong U.S. gasoline supplies, now at 14-year highs, also helped weigh on prices as speculators across many commodities trimmed their positions.
U.S. oil CLc1 traded down $1.36 at $103.16 a barrel, off the record $105.97 a barrel struck earlier in the day. London Brent crude LCOc1 fell $1.12 to $100.52 a barrel, after hitting a record $102.95.
Traders began to take profits after oil settled $5 higher on Wednesday, marking oil's single biggest price gain in absolute dollar terms, according to Reuters database EcoWin, although there have been larger daily percentage price gains.
"Looks like some profit taking in crude and other commodities," said Tom Bentz, an analyst at BNP Paribas Commodity Futures Inc.
A rise in speculative buying as investors seek a hedge against inflation and the tumbling dollar have helped propel oil to record levels.
The dollar extended losses against the euro and the yen on Thursday after U.S. pending home sales were reported unchanged in January, doing little to allay investor worries over the deteriorating U.S. economic outlook. nN06205112
"The crude squeeze continues. The sharp rise in crude was exacerbated by a weak U.S. dollar, OPEC's decision to stand still," Citigroup said in a research note.
OPEC HOLD
The Organization of Petroleum Exporting Countries agreed to hold production at current levels on Wednesday, despite calls from the Untied States to increase output to help consumers already battered by the mortgage crisis and the credit crunch.
Cartel members insist oil markets are well supplied and blame the surge in prices on speculators and the "mismanagement" of the U.S. economy.
A U.S. government report Wednesday showed crude stocks in the world's largest consumer fell by 3.1 million barrels last week, against analysts' forecasts for an increase.
Distillate inventories, including heating oil, fell 4.8 million barrels, dropping for the fourth consecutive week, as colder weather hit the U.S. Northeast, while gasoline stocks rose for the 17th straight week. <EIA/S>
OPEC will next meet in September to assess production levels and evaluate the market, although ministers could confer informally at a conference between consumers and producers in Rome on April 20-22.
"This suggests to me the cartel would allow prices to move sharply higher without adding extra barrels to the marketplace," Robert Laughlin of MF Global said in a report.
Tensions between OPEC member Venezuela, a top oil exporter to the United States, and neighbor Colombia provided further support to the market. L06843009
Venezuela deployed forces toward the Colombian border on Wednesday, after a crisis erupted last weekend when Colombia launched a raid against rebels inside OPEC member Ecuador.
(Additional reporting by Maryelle Demongeot in Singapore; Ikuko Kao in London and Robert Gibbons and Matthew Robinson in New York; editing by Walter Bagley)
