Oil prices fall below $88 in Asian trading

Oil prices fall below $88 in Asian trading

Singapore: Oil prices dropped in Asian trading on 22 October, extending a retreat from last week’s record above $90 a barrel as investors sold to lock in profits before the contract expires later in the day.

Light, sweet crude for November delivery lost 86 cents to $87.74 a barrel in electronic trading on the New York Mercantile Exchange, midmorning in Singapore.

The contract fell 87 cents to settle at $88.60 a barrel Friday, after rising as high as $90.07 in earlier electronic trade. December Nymex crude declined 75 cents to $87.85 a barrel.

Still, many analysts expect the declines to be temporary and believe oil futures will continue their assault on price records in the days ahead. They say prices are being driven by a weak dollar, speculative investing and low supplies at a key oil terminal in the US Midwest.

Crude prices have jumped 28% since late August despite a growing consensus among analysts that oil’s underlying supply and demand fundamentals do not support such high prices.

While organizations such as the International Energy Agency and the Organization of Petroleum Exporting Countries warn that demand for oil will increase in the fourth quarter, many observers think the demand forecasts are overstated. Demand for gasoline is actually falling, the Energy Department says. Domestic oil inventories are at high levels by historic standards, and grew in the week ended 12 October.

Oil inventories at the Nymex delivery point of Cushing, Okla., though, fell that week even as the overall supplies grew. And falling Cushing supplies feed a perception that, while overall oil supplies might be sound, it is harder to secure oil in the short term.

Investors have been drawn to energy futures as a hedge against the weakening US dollar. The falling dollar has also made dollar-denominated oil futures less expensive in some other currencies, and speculators have been lured to the crude market by profits that can be made arbitraging various oil contracts, experts say.

Worries over tensions between Turkey and Kurdish rebels in northern Iraq were also a factor in lifting crude oil prices to last week’s record. On Sunday, Turkish artillery units shelled Kurdish rebel positions along the rugged Turkish-Iraqi border in retaliation for a rebel attack that killed at least 12 soldiers.

In London, December Brent crude dropped 77 cents to $83.02 a barrel on the ICE futures exchange.

Nymex heating oil futures fell 1.36 cents to $2.317 a gallon (3.8 liters) while gasoline prices declined 1.62 cents to $2.1525 a gallon. Natural gas futures fell 1.7 cents to $7.053 per 1,000 cubic feet.