Oil eases as investors take profits from new peaks
Oil prices fell nearly 1% to below $93 a barrel on Tuesday, fading from their latest record high as investors took profits from a rally driven by a Mexican supply failure and the spiralling dollar.
United States crude fell by 71 cents to $92,82 a barrel by 5.43am GMT after hitting a record high of $93,80 in the previous session. London Brent lost 59 cents to $89,73, down nearly $1 from its record high.
“Investors are reluctant to buy oil at high prices and they are trying to take profits at the moment,” said Tetsu Emori, fund manager at Japan’s Astmax Futures.
“But the market is still strong—the trouble in Mexico is very supportive and the weak dollar also provides room for oil prices to go up.”
State oil company Pemex has shut a fifth of Mexico’s crude production and halted the bulk of exports, as storms kept ships bottled at ports across the country. It hopes to resume supplies when bad weather eases in a day or so.
The dollar hovered near record lows versus the euro and major currencies on Tuesday, ahead of an expected interest rate cut when the US Federal Reserve’s Federal Open Market Committee meets on October 30 and 31.
Lower interest rates in the wake of the US subprime debacle helped fuel an influx of investor capital into commodities, pushing oil toward its inflation-adjusted peak of $101,70 a barrel in April 1980.
Despite widespread expectations of cheaper money, the Wall Street Journal reported on Tuesday that a rate cut was not a sure thing, causing the dollar to firm slightly.
Oil cartel Opec has shrugged off calls from importer nations to cool prices by raising crude output, blaming politics and speculation—not a supply shortfall—for $90-plus oil.
On Wednesday traders will shift focus to weekly US inventory data expected to show crude stocks rose 600 000 barrels in the week to October 26, helping buffer stocks after last week’s sharp decline, which kicked off an $8 rise over four days.
Distillate stocks were seen falling by 1,1-million barrels and gasoline stocks down by 300 000 barrels.