Singapore: Oil fell on 23 October, extending a sell-off from record highs on concerns about the state of the US economy and a recovery in the dollar, amid hopes that Turkey will refrain from taking military action against Kurdish rebels.
US light crude for December delivery fell 26 cents to $85.76 a barrel by 0306 GMT, down about $2.07 from around the same time on Monday, despite a slight rebound in US equities.
Oil has lost more than $4.00 since hitting a record-high of $90.07 on Friday, and fell on Monday along with other commodities including gold, as well as corn and soybeans, on the back of the dollar’s rebound from a record low against the euro.
London Brent crude fell 36 cents to $82.91 a barrel.
The levels were still up about 5% from the beginning of the month and 40% from the start of the year, buoyed by worries about insufficient energy inventories during the Northern Hemisphere’s winter and geopolitical concerns.
“Oil markets will continue to have an eye on geopolitical developments, especially the current tensions between Turkey and Kurdish rebels in Iraq,” said Commonwealth Bank Australia commodities strategist David Moore in a note to clients.
But the market is looking for a breather from an expected second-straight week of higher US crude oil stocks, even though the rise for the latest week is seen at just 100,000 barrels, after a 1.8 million-barrel build in the week ended 12 October.
A Reuters poll also forecast a 1.1 million-barrel increase in gasoline stocks, but a 300,000-barrel draw on distillates for the week to 19 October, while refinery runs were expected to be unchanged from the previous week’s 87.3% level.
Concerns that a housing slump in the world’s largest oil consumer could drag the economy into recession, and limiting future oil demand, has played against recent bullish sentiment.
Tensions in the Middle East are also easing for now, after Turkey said late on Monday it would exhaust diplomatic channels before launching any strike into northern Iraq to root out Kurdish rebels, who killed at least a dozen Turkish solders in fighting over the weekend.
Analysts last week credited the heightened tension between Iraq and Turkey as one factor behind oil’s rise to record highs.
Focus will also be on Iran’s new nuclear negotiator, who steps onto the international stage for the first time on 23 October at a meeting where Western diplomats will try to gauge whether Tehran has hardened its stance on its atomic programme. The new chief negotiator, Saeed Jalili, is a close ally of President Mahmoud Ahmadinejad.