Oil prices fell 4 per cent yesterday as hedge fund speculators took profits from an all-time high above $60 (€49.71)).
US crude traded $2.54 lower at $58 a barrel, having set a record at $60.95 on Monday on the New York Mercantile Exchange. London Brent dropped $2.02 cents to $57.28 a barrel after setting a record at $59.59 on Monday on the International Petroleum Exchange.
Oil demand in the United States and Asia has held strong in the face of high fuel costs, encouraging traders to test the upper limits of what consumers will pay for. But US treasury secretary John Snow said there was no doubt now that inflated fuel costs were hurting the US economy, though not enough to halt or reverse recovery. "Clearly, it's hurting," Snow said in an interview. "I don't see it derailing the strong recovery we're in ... but it does take a few tenths of a (percentage) point off GDP growth, that's for sure."
A buying surge by speculative funds has pushed prices up almost by a third since May amid growing fears of a global strain on production and refining capacity, especially in the fourth quarter, when demand for heating oil peaks.
"I think realisation has set in that this situation will not go away in a hurry. Apart from worries over Iran, there is the question of what Opec can do to bring down prices. The answer is - very little," said broker Rob Laughlin of Man Financial in London. "The only thing that can halt oil's rise is evidence it is damaging the global economy. So far we have not seen that."
The Organization of the Petroleum Exporting Countries (Opec), already pumping crude near the highest level in 25 years, could decide this week to raise output limits by half a million barrels per day. But the cartel has repeatedly said more crude may not help cool prices, which are being driven by possible shortages of refined products. US crude stocks are near six-year highs reached earlier this summer.
Data due today is expected to show US crude stocks fell last week, while stocks of distillates are forecast to have risen 1.6 million barrels.
