Sydney: Oil fell nearly $2 to around $100 a barrel on Monday, extending last week’s deep losses as funds sought to lock in first-quarter profits and Saudi Arabia reassured consumers of its plans to boost supply.
U.S. light crude for May delivery fell $1.70 to $100.14 a barrel in Globex electronic trading by 0418 GMT. Prices dropped by almost $9, about 8%, last week as investors fled the commodities complex on fears that gains had been overdone, giving a lift to the beleaguered dollar in the process.
London Brent crude fell $1.46 cents to $98.92.
“I think there’s still a lot of profit taking in the market and that is pushing down oil prices. The U.S. dollar is also bouncing back from major currencies, so that’s adding to the downward pressure,” said Tetsu Emori, a Tokyo-based fund manager at Astmax Co Ltd.
“The market could also be reacting to comments from Saudi Arabia.”
Saudi Arabia said on 23 March it was working to expand its oil production and refinery capacity in order to maintain world economic growth, reaffirming its vow to invest tens of billions of dollars in new wells and infrastructure.
“The kingdom will work with Opec countries, other producers and consuming countries towards oil market stability and to avoid the effects of harmful speculation,” the Supreme Council of Petroleum and Mineral Affairs said in a statement following a visit by U.S. Vice President Dick Cheney.
Washington has said it wants Saudi Arabia to help raise Opec production to ease prices, but the producers’ cartel has resisted pumping more crude due to fears of weakening demand.
A tumbling U.S. dollar and geopolitics in the Middle East have helped fuel the recent oil rally, which also saw other commodities hit a series of record highs since the start of the year as investors fled stock markets and took refuge in dollar-denominated assets.
But oil has fallen sharply from its lifetime high of $111.80 on 17 March, as nervous investors, worried about the outlook of the global economy, cash in on recent record prices.
And the dollar continued its uptrend versus the euro, up 0.5% to $1.5360 from late Asian trading on 21 March, rising further from a record low of $1.5905 struck on electronic trading platform EBS last week.
Opec President Chakib Khelil said on Saturday petroleum prices will range between $80 and $110 per barrel for the rest of 2008.
The reopening of Mexico’s oil ports on Friday also weighed on prices. The government said Coatzacoalcos and Dos Bocas had opened on 21 March after a two-day closure due to bad weather.
With prices falling at the start of last week, speculators quickly cut their long positions to reduce leverage in portfolios and raise cash to meet margin calls stemming from turmoil in global capital markets, traders said.
Speculators’ net crude long positions fell to 86,352 in the week ended 18 March, data from the commodity Futures Trading Commission released 21 March showed, down from 113,307 the previous week, which was the highest net long position since an all-time high of 127,291 hit on 31 July.