Oil falls from record high above $96
Foreign Desk Report

LONDON—Oil fell more than $1 on Thursday as investors cashed in on a new peak of $96 a barrel struck following a sharp decline in U.S. crude stocks and the U.S. Federal Reserve’s interest rate cut the previous day.
U.S. crude had earlier closed in on an inflation-adjusted high of $101.70 hit in 1980 on the very day OPEC injected an extra 500,000 barrels per day in a failed attempt to check oil’s relentless rise from $70 in mid-August. U.S. oil rose as high as $96.24 a barrel before retreating to $92.20, down $2.33, by 10:08 a.m. EDT. Brent crude also struck a record $91.71 before dropping to $88.62, down $2.01.
Oil soared about 5 percent on Wednesday after U.S. refiners drained 3.9 million barrels of crude from storage, mostly from tanks in Cushing, Oklahoma — delivery point for the NYMEX oil contract. The surprise decline came at a time when the world’s thirst for oil is climbing towards its seasonal fourth-quarter peak as winter arrives in the northern hemisphere. “Today’s $96 oil price recognizes the current tightness in market fundamentals, especially ahead of increased seasonal demand,” said Robin Batchelor of global asset manager BlackRock. That is not the view of the Organisation of the Petroleum Exporting Countries, supplier of more than a third of the world’s oil. OPEC oil ministers are blaming speculators, political tensions and a weak U.S. dollar for driving up the cost of fuel and have resisted consumer calls for more oil. “The question is if there is any shortage in the supply. There is no ... shortage in crude oil,” Qatar Oil Minister Abdullah al-Attiyah told reporters in Tokyo on Thursday.
“It’s market-driven and the market is out of our control,” he said, reiterating comments made earlier this week. An OPEC supply increase of 500,000 bpd, agreed in September in a gesture to consumers worried about the economic impact of record prices, takes effect on November 1. Analysts have called the move too little, too late. But top executives from oil majors Exxon Mobil and Royal Dutch Shell have said in recent weeks the market is not short of oil. Unprecedented weakness in the U.S. currency has boosted many dollar-denominated commodities and helped fuel oil’s rally.
Prices were also buoyed by the Federal Reserve’s decision on Wednesday to lower interest rates by a quarter percentage point to reduce the risk of a slowdown in the world’s biggest economy. Rate cuts by the Fed have added liquidity to financial markets by making it cheaper to borrow.
Analysts say some of the extra cash has been drawn to energy markets and contributed to oil’s record rally. Oil in New York has more than quadrupled from below $20 a barrel in early 2002.
Crude oil prices shot higher and then retreated sharply Thursday, reaching a new record of $96 before concerns about the economy motivated investors to cash in some of their recent gains. The Commerce Department’s report that consumer spending rose by 0.3 percent in September, less than the 0.4 percent increase analysts expected, raised the prospect of a slowing economy that could depress demand for oil.