Oil prices dip below USD 69 a barrel after overnight climb

Oil prices fell back Tuesday after closing at a nine-month high above US$69 a barrel in the previous session.

Light, sweet crude for July delivery lost 18 cents to US$68.91 a barrel in Asian electronic trading on the New York Mercantile Exchange, midday in Singapore.

The contract on Monday rose US$1.09 to settle at US$69.09 a barrel after Nigerian oil unions called a strike for this week amid continuing unrest and violence in the country's oil producing regions. A Nymex front-month contract last closed above US$69 on Sept. 1 last year.

Analysts said the news out of Nigeria prompted large funds to buy energy futures, driving prices higher.

"I think it's just profit taking this morning," said Tetsu Emori, chief commodities strategist at Mitsui Bussan Futures in Tokyo. The overnight jump in oil prices was not reflective of the demand-supply picture, he said.

"It's quite difficult to understand why oil prices rise so high when crude oil supplies are still enough," Emori said.

Attacks by angry villagers and gunmen that cut supply on two Nigerian oil facilities helped drive the price increase Monday.

Hundreds of angry villagers chased workers away from a Chevron Corp. oil-transfer facility Monday in restive southern Nigeria and occupied the premises to try to get money they say they is owed by the oil industry.

Gunmen also seized some two dozen Nigerian workers and security forces at a flow station operated by Italian energy giant Eni SpA's subsidiary Agip. As well, Nigerian oil unions called a general nationwide strike to begin Wednesday in protest of a government price hike on automobile fuel.

Emori said the market had already taken into account the supply risks posed by the general unrest in Nigeria, Africa's biggest oil producer and one of the top overseas suppliers to the United States.

"We have to understand that the world's oil production capacity is at a historic high," Emori said. "That means that (producers) can quickly produce crude if there is a big drop" in global supply, he said.

Heating oil futures dropped 0.67 cent to US$2.0275 a gallon (3.8 liters) while natural gas prices fell 2.5 cents to US$7.665 per 1,000 cubic feet.