Oil eases as funds take profits from bull run
Oil eases as funds take profits from bull run
Reuters London
Oil prices eased on Monday as speculative hedge funds took profits from recent strong gains made on supply concerns for the northern winter and violence in the Middle East.
Benchmark Brent crude dropped 51 U.S. cents to US$29.05 a barrel in London and U.S. light crude for December delivery fell 67 U.S. cents to $31.70 a barrel.
Heavy buying by investment funds has helped push prices up 12 percent this month and analysts said speculators would now look to take profits. Since the Iraq war U.S. crude has held strong above $25 a barrel, but has repeatedly failed to break above the $33 a barrel level.
"This market does now look vulnerable to fund liquidation and this is probably what we are seeing," analysts at Barclays Capital bank said in a report.
Oil prices have risen by $4 since the deal in September by the Organization of the Petroleum Exporting Countries to cut production by 3.5 percent in November.
OPEC meets next on December 4 and some analysts have said that the cartel will need to cut supply again to offset rising output from Russia and Iraq.
Venezuela said on Monday that despite the current price strength OPEC would not raise production.
"We maintain our position to cut production if it is necessary...or to keep it stable. But we are not thinking about increasing production," Venezuela Energy Minister Rafael Ramirez said.
Shipping brokers say heavy tanker loadings from the Middle East suggest OPEC has not implemented existing cutbacks in full, noting extra bookings by top world exporter Saudi Arabia.
Suicide bombs in Saudi Arabia and Iraq have bolstered concern over supply from the Middle East, which pumps a third of the world's oil.
A unit of militant group Al-Qaeda claimed responsibility for Saturday's blasts at two Turkish synagogues that killed at least 23 people. The unit also threatened the United States, Australia, Japan, Italy and Britain, as well as their Arab allies, with more bombings.
"The geopolitical backdrop is undoubtedly another key factor in keeping prices firm," said Man Financial in a research note. "Every day we are seeing more turmoil on the Middle East and this past weekend the grim news was worse than usual."
A U.S. government report showing crude and heating oil stocks falling ahead of winter bolstered last week's gains as refined oil product stocks are below comfortable levels in the United States, the world's biggest oil consumer.
Rapid fuel demand growth in China has also strengthened international prices, as has Iraq's failure to return to pre-war export levels has helped buoy prices this year.
A senior Iraq oil official said on Monday that the country's northern oil export pipeline was still not secure enough to restart despite new U.S. led forces deployed to protect it.