Oil prices hold near record levels above USD83 barrel

Oil prices were steady Monday after closing at a new record in the previous session on worries that supplies are insufficient for coming winter demand amid reports of declining crude inventories.

Photo: Oil prices hold near record levels above USD83 barrel

Light, sweet crude for November delivery fell 12 cents to US$83.57 a barrel in Asian electronic trading on the New York Mercantile Exchange, midmorning in Singapore. The contract rose 61 cents to settle at a record US$83.69 a barrel on Friday after rising as high as US$84.05, also a record.

Brent crude futures fell 34 cents to US$80.21 a barrel on the ICE futures exchange in London.

Recent reports have indicated that crude inventories are falling. Last week, the U.S. Energy Department reported that U.S. oil supplies declined in the week ended Oct. 5, while the International Energy Agency said that oil inventories held by the world's largest industrialized countries have fallen below a five-year average.

"One of the factors that has provided underlying support to oil prices in recent weeks has been concerns that if we move into the Northern (Hemisphere) winter that oil market conditions are likely to remain tight," said David Moore, commodity strategist at the Commonwealth Bank of Australia in Sydney.

Some analysts think the supply shortfall in last week's U.S. Energy Department inventory report is an anomaly. They doubt demand is as strong as recent forecasts by the department and the IEA suggest. These analysts expect oil prices will soon begin a seasonal decline to US$70 a barrel, or lower.

Prices were also supported by worries that Turkey could take unilateral military action against Kurdish rebels in northern Iraq, following comments by the Turkish prime minister Friday that suggest Turkey will not worry about the diplomatic consequences of such an incursion.

"Anything that's seen as affecting the stability in the Middle East tends to have an impact on oil prices," Moore said.

U.S. Secretary of State Condoleezza Rice on Saturday urged Turkey to show restraint in its response to attacks from Kurdish rebels, but Turkish leaders have appeared to be less receptive to Washington's appeals since a committee of U.S. lawmakers passed a resolution last week labeling as genocide the World War I-era killings of Armenians by the Ottomans - a characterization that Turkey rejects.

Nymex heating oil futures lost 0.04 cent to US$2.246 a gallon (3.8 liters) while gasoline prices added 0.09 cent to US$2.086 a gallon. Natural gas futures rose 18.1 cents to US$7.155 per 1,000 cubic feet.