AP
Oil Retreats From $92 on Profit-Taking
Friday October 26, 6:17 pm ET
By John Wilen, AP Business Writer
Crude Closes at New Record Friday on Supply Concerns, but Backs Off $92 Hit Overnight


NEW YORK (AP) -- Crude futures rose to record levels on Friday, supported by worries over political tensions in the Middle East where the U.S. imposed sanctions on Iran and Turkish troops remained massed at the Iraq board to counter Kurdish rebels.

In addition, the market was unsettled by a dawn attack on an oil vessel off the coast of Nigeria by anti-government militants and suggestions that OPEC oil shipments are not rising as quickly as expected.

"On the back of mounting evidence that the oil balances are tight, and tightening, markets are becoming increasingly uneasy over the prospects of entering the winter high-demand season with inventories at too-low levels," Kevin Norrish, an analyst with Barclays Capital PLC, said in a research note.

While rising more than $1, crude futures retreated from an earlier all time high above $92 as investors sold to lock in profits from the latest multi-day record-setting rally.

Oil futures have risen nearly $7 a barrel, or 8 percent, since the government on Wednesday reported a sharp drop in crude inventories in the United States. The inventory numbers reinforced a view that oil supplies are falling at a time of year when they should be rising to meet expected strong fourth-quarter demand.

Light, sweet crude for December delivery rose $1.40 to settle Friday at a record $91.86 a barrel on the New York Mercantile Exchange after rising overnight as high as $92.22, a new trading peak. Crude prices jumped $3.36 a barrel on Thursday.

With the recent gains, the price of oil is closing in on the inflation-adjusted highs hit in early 1980. Depending on the adjustment, a $38 barrel of oil in 1980 would be worth $96 to $101 or more today.

Some analysts argue that the underlying fundamentals don't support such high prices, and say speculative buying is the real reason prices are rising. Tim Evans, an analyst at Citigroup Inc. in New York, noted that despite last week's decline in domestic inventories, supplies remain high by historic standards. Also, the Organization of Petroleum Exporting Countries is set to boost production by 500,000 barrels a day beginning Nov. 1.

"What we're seeing ... is rising supply and relatively weak demand," Evans said. He believes oil's "true value" is closer to $65 a barrel.

Other petroleum futures also rose Friday. November gasoline rose 3.82 cents to settle at $2.274 a gallon on the Nymex, while heating oil futures rose 2.41 cents to settle at $2.4325 a gallon.

November natural gas futures rose 0.3 cent to settle at $7.218 per 1,000 cubic feet.

In London, December Brent crude rose $1.21 to settle at $88.69 a barrel on the ICE Futures exchange.

Pump prices have risen slightly in recent weeks to keep pace with oil's rally. On Friday, the average national price of a gallon of gas inched 0.3 cent higher to $2.823 a gallon, according to AAA and the Oil Price Information Service.

AP Business Writers Thomas Hogue in Bangkok, Thailand, and Pablo Gorondi in Budapest, Hungary, contributed to this report.