Oil near $90 ahead of Fed rate decision

Oil bounced off early lows to hover around $90 a barrel on Wednesday after some profit-taking from this week's record high, as the market awaited a key rate decision in the U.S. and data on crude inventories there.

There was uncertainty over how aggressive the U.S. Federal Reserve will be in cutting rates to fuel economic growth, although the dollar's drop to a fresh low against the euro showed investors betting on a rate cut on Wednesday.

U.S. oil futures fell 22 cents to $90.10 a barrel by 6:46 a.m. EST, off lows of $88.92, on top of a $4 slide in the previous session. It hit a record high of $93.80 on Monday. London Brent eased 10 cents to $87.35.

Investors said they expected profit-taking to continue in the absence of any fresh geopolitical factors.

"The move to $93-plus levels was driven by speculation," said Badung Tariono, who manages ABN AMRO's Energy fund out of Amsterdam. "If you look at product prices, which is a gauge of refinery demand, they didn't go up by the same magnitude. This shows that the world's sufficiently supplied in terms of crude," he added.

Those views were echoed by the Organisation of Arab Petroleum Exporting Countries (OAPEC), whose Secretary-General Abdel Aziz Abdullah al-Turki said the oil market was no longer driven purely by demand and supply factors, but by speculators."There are those who trade in what are called paper barrels, and this is now five times the real trade," he told reporters in Cairo.

10/31/2007 7:01:16 AM