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Oil Slips Below $110 After Record Rally

Reuters
Friday, 14 Mar 2008 | 12:30 PM ET

Oil slipped Friday as investors took profits from a record rally that pushed prices to a record $111 in the previous session.

"One dollar down is not very significant. It would need a lot more weakness to shake out the speculators," said Christopher Bellew at Bache Financial in London.

U.S. light, sweet crude for April delivery fell 37 cents to $109.96 a barrel by 1710 GMT in volatile trade. It touched a record for the seventh time in a row the previous session.

London Brent crude for April, which expires later in the day, hit a record of $108.02 a barrel before easing back to $106.97.

Barclays Capital said tight fundamentals, including disappointing non-OPEC production and soaring energy imports into China, continued to underpin the record high oil prices.

Fundamentals in the middle distillates market -- heating oil, diesel and jet fuel -- remain strong on the back of low stocks and extensive refinery maintenance in Europe and in key suppliers to the region.

Gas oil futures, the benchmark for European diesel, heating oil and jet fuel prices, hit a fresh record of $1,000.50 a ton on persistent diesel shortages in Europe due to low stocks and extensive refinery maintenance.

The gas oil crack, the premium of ICE gas oil futures to Brent, hit a new record high of $26.78 in a sign of tight distillate supply situation.

Worries Over Economy

Worries about a recession in the United States, the world's top oil consumer, were the theme of remarks by Martin Feldstein, president of the National Bureau of Economic Research who said the country was in a recession that could be "substantially more severe" than recent ones.

The dollar hit a record low against the euro and fell back to a fresh 12-year low versus the yen on Friday after Bear Stearns said its liquidity position had deteriorated, stoking fears of a deep recession.

Venezuela is requiring payments in Euros on some contracts for crude, product and spot sales, Energy Minister Rafael Ramirez told Reuters Friday.

There was no target for the amount of crude to be paid in Euros, he said.

Inflation in consumer nations have been creeping up due to high energy costs, but the Organization of Petroleum Exporting Countries again shrugged off calls for more oil to pull record prices back, giving support to crude prices.

OPEC said on Friday it was pumping more than enough crude to keep consumers satisfied and a potential recession could mean lower demand for its crude.

OPEC, in its monthly oil market report, said there was little risk of a rise in oil demand growth forecasts given the slowing economy of the world's top fuel consumer.

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