Oil Slips on Profit Taking, Supply Worries Persist

Monday, 30 Jul 2007 | 3:29 PM ET

Oil fell on Monday as traders took profits after supply concerns sent prices above $77 a
barrel last week and near record highs.

U.S. crude fell 44 cents to $76.58 a barrel in volatile trade after gaining $2.07 on Friday. London Brent crude gave up 78 cents to $75.48, after the North Sea benchmark reverted to a discount to U.S. crude last week on lower U.S. oil inventories.

"We've tried to pull back on profit taking after the surge on Friday," said Mike Zarembksi, senior commodities analyst for optionsXpress.

Concerns over falling stocks at Cushing, Oklahoma, the delivery point for the New York Mercantile Exchange's oil futures contract helped push up prices last week.

Further support came from forecasts that supplies could have trouble keeping up with demand growth this year as analysts lowered non-OPEC production estimates.

"In the medium term, and into 2008, the market could be tight, if many large projects do not come on stream, like it happened this year," said Badung Tariono, who manages a
500-million-euro ($683.5 million) energy fund for ABN AMRO Asset management.

"Given the low spare capacity that exists, it could be a wide and volatile trading band of between $60 to $80."

But without fresh geopolitical shocks, or disruptive factors such as hurricanes, oil prices could ease back to either the high $60s or $70s in the near term, Tariono added.

Oil's rally sent it near last year's record high of $78.40, although OPEC has rebuffed calls by consumers for more crude.

OPEC's No. 2 producer Iran said on Sunday it did not expect the exporter group to raise output at its meeting on Sept. 11.

"I do not imagine that, at its next regular annual meeting, OPEC would put the issue of changing its output level on the agenda," Iranian Oil Minister Kazem Vaziri-Hamaneh was quoted as saying.

OPEC Secretary-General Abdullah al-Badri told an Austrian newspaper that oil prices are about $7 per barrel above the real market value because of concerns about supply security.

Weekly U.S. inventory data last Wednesday showed a third straight decline in U.S. crude stocks and analysts said OPEC supply restraints would ensure further falls.

"There are substantial upside risks to prices this winter, if OPEC does not expand output," Francisco Blanch, head of global commodity research at Merrill Lynch, said in a report.

"Should the weather turn unseasonably cold in November or December, we believe oil prices could spike well above $80."

U.S. economic data showing gross domestic product grew at a 3.4 percent annual rate, the fastest since the first quarter of 2006, aided Friday's price gains.

That news helped oil shake off some of the anxiety brought on by a two-day rout in global equity markets, sparked in part by the deteriorating U.S. housing market.

  Price   Change %Change


Contact U.S. News


    Get the best of CNBC in your inbox

    › Learn More

Don't Miss

U.S. Video

  • Bitcoin. Digital gold rush or a shadowy tool empowering criminals on the dark web? What is really driving The Bitcoin Uprising? CNBC's Mary Thompson takes an in-depth look at this emerging digital currency by speaking to the bitcoin faithful, who believe the open source currency will upend the global financial system, as well as those who believe bitcoin is an easily manipulated tool that empowers criminals, hackers and drug barons in the dark online underworld. Although the future of bitcoin is uncertain, The Bitcoin Uprising sheds much needed light on the speculative currency and the future of money.

  • Loyalists around the world have embraced it as the cryptocurrency of the future, but some big names on the street differ widely in their beliefs about bitcoin. The Oracle of Omaha thinks it's a "joke." Tech entrepreneur Marc Andreessen counters that Buffett is out of touch, while bitcoin believers like Jonathan Rumion fully embrace the digital currency by buying groceries with bitcoin and even getting paid in bitcoin. CNBC's Mary Thompson reports.

  • Authorities say the online black-market bazaar Silk Road could be the tip of the iceberg when it comes to the criminal underworld using bitcoin for trading in illicit goods and services. On the "Dark Web," fake IDs, drugs, even hit men are all paid in bitcoin. CNBC's Mary Thompson explores why bitcoin is the currency of choice for criminal activity on the dark web and reports on the story of Mt. Gox, the largest bitcoin exchange, which shut down in February, leaving bitcoin investors holding the bag.