Oil fell more than a dollar on Tuesday, pressured by fund selling


Oil fell more than a dollar on Tuesday, pressured by fund selling in response to concerns over an economic slowdown in top energy consumer the United States that could dampen demand for oil.

U.S. light crude for March delivery fell $1.48 to $88.54 a barrel by 9:00 a.m. EST, after a gain on Monday of $1.06. London Brent crude fell $1.46 cents to $89.01.

A series of bullish factors helped oil prices advance above $90 a barrel on Monday, including shipping delays into the United States caused by fog in the Houston Ship Channel, attacks by Turkey on northern Iraq and an armed raid by militants on an oil pipeline hub in Nigeria. But these ultimately did not outweigh worries about the broader economic outlook.

"It's pressure from fund liquidation brought on by the bearish economic fundamentals that could mean lower demand for oil," said Christopher Bellew, senior vice president at Bache Commodities.

Equity markets in Europe came under pressure from concerns that the six-month old credit market crisis has begun to affect the wider economy, including consumer and service sectors.

Gold, which has benefited from turmoil in the equity markets, was also under pressure, falling more than 1 percent, as profit taking kicked in after last week's all-time high.

Oil reached a record of $100.09 a barrel on January 3, partly due to expectations that oil supplies will struggle to keep pace in the long-term with demand from high growth economies such as India and China.

Prices are now around $10 below those highs, largely because of fears of a recession in the United States that could mean lower oil consumption.

But some analysts say shifts in the oil price curve, which projects the price into the future, suggest a U.S. recession may already be discounted.


TradingEconomics.com, Bloomberg
2/5/2008 6:44:42 AM