Oil prices tumble on profit taking

January 05, 2011 | 08:00

(0) user say

Oil prices tumbled on Tuesday, falling under $90 in New York as many investors took profits from a recent rally.

New York's main contract, light sweet crude for February delivery, dived $2.17 to $89.38 per barrel.

Brent North Sea crude for February sank $1.31 to $93.53 in London trade.

Prices jumped to fresh two-year highs on Monday on growing confidence that global demand will increase after the US economy showed more signs of recovery.

The market also edged higher in early deals on Tuesday, before hitting reverse amid heavy profit-taking.

The price drops "started with the precious metals and rapidly spilled over to oil. There is certainly some profit taking," said John Kilduff, an analyst at Again Capital.

"We came into the new year with record speculative length, and there was a lot of anticipation that there would be immediate burst of buying in the new year, but that failed to materialize," he said.

The oil market was also hampered by a late rebound in the dollar, which makes dollar-priced crude more expensive for buyers using weaker currencies. In turn, that tends to dent demand and prices.

AFP

What the stars mean:

★ Poor ★ ★ Promising ★★★ Good ★★★★ Very good ★★★★★ Exceptional