September 28, 2007 / 2:41 AM / 10 years ago

Oil falls as dealers take profits

<p>A fly rests on a bottle of automotive oil at a gas station in New York September 14, 2007.Lucas Jackson</p>

NEW YORK (Reuters) - Oil fell on Friday as traders took profits from near-record prices and as worries lingered over a slowdown in the U.S. economy.

U.S. crude settled down $1.22 to $81.66 a barrel after gaining $2.58, or 3.24 percent, in the previous session. London Brent crude fell 86 cents to $79.17 a barrel.

"The market just ran out of momentum here and there's been some profit-taking as there was no hard news to drive the market to new highs," said Phil Flynn, analyst at Alaron Trading in Chicago.

A more than 30 percent rally in oil prices this year pushed U.S. crude to a record $83.90 last week as analysts anticipated tightening global stockpiles.

But the surging price of oil has renewed fears that energy costs, combined with a credit crunch and a U.S. housing slowdown, could drag heavily on economic growth.

Global stock markets were also lower on Friday, hurt by the near-record oil prices and concerns about health of consumer spending and business investment.

Early losses were limited, however, by the weak U.S. dollar, which tends to strengthen the nominal values of commodities traded in the currency.

Continued expectations of tightening supply heading into the winter heating season and the threat of supply disruptions due to hurricanes also kept a floor under prices.

"In terms of inventories to demand, the ratio is getting smaller and we're seeing a bullish impact on prices," said ANZ analyst Andrew Harrington.

Additional reporting by Matthew Robinson in New York, Randy Fabi in London, Damon Evans in Singapore

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