Oil prices skid below $88 a barrel
LONDON (AP) _ Oil prices dropped more than $1 a barrel Monday, extending a retreat from last week's record above $90 a barrel as investors took profits before the contract expired.
Still, many analysts expect the declines to be temporary and believe oil futures will resume their assault on price records. They say prices are being driven by a weak dollar, speculative investing and low supplies at a key oil terminal in the U.S. Midwest.
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.
Light, sweet crude for November delivery lost $1.05 to $87.55 a barrel in electronic trading on the New York Mercantile Exchange by afternoon in Europe.
The contract fell 87 cents to settle at $88.60 a barrel Friday, after rising as high as $90.07 in earlier trading.
December Nymex crude, which becomes the front-month contract after the November contract expires Monday, declined $1.09 to $85.86 a barrel.
In London, December Brent crude dropped 81 cents to $82.98 a barrel on the ICE futures exchange.
Crude prices have jumped 28 percent 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 U.S. Energy Department says. Domestic oil inventories are at high levels by historic standards, and grew in the week ended Oct. 12.
Oil inventories at the Nymex delivery point of Cushing, Oklahoma, 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.
Nymex heating oil futures fell 1.48 cents to $2.3158 a gallon while gasoline prices declined 3.06 cents to $2.1381 a gallon. Natural gas futures shaded lower to $7.032 per 1,000 cubic feet.
Investors have been drawn to energy futures as a hedge against the weakening U.S. 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.