Oil: Brent crude falls from record high above $74

LONDON - Oil prices fell today, after setting a fresh all-time high above $74 a barrel in London, as investors took profits across booming commodity markets.

Prices also slipped as Royal Dutch Shell said it expected to restart a key Gulf of Mexico oil and gas field by the end of May, ahead of plan. The 140,000-barrel-per-day Mars platform was damaged by Hurricane Katrina last year.

London's Brent crude settled down 55 cents at $73.18 a barrel, after hitting an all-time high of $74.22. US May crude was down 22 cents at $71.95, having hit an all-time high of $72.49 earlier.

The new front-month US June crude contract opened electronic trade at $73.40 a barrel.

"It's not surprising, given the levels that we've got to, that there is some profit-taking going on," said Kevin Norrish, an analyst at Barclays Capital in London.

Prices hit new peaks after the US government yesterday reported a larger-than-expected drop in petrol inventories, adding to concern created by production losses in Nigeria and the dispute over Iran's nuclear intentions..

US petrol stocks fell by more than 5 million barrels as imports slipped, while demand averaged over 9.1 million bpd, 0.8 per cent more than a year earlier, the US Energy Information Administration said in a report.

"We've gone from comfortable US petrol stocks to average and seem to be heading very clearly toward the low of the range," said Deborah White of SG SIB Commodities in Paris. "The market is worried about that."


The drop in oil coincided with a dip in prices of industrial and precious metals, which earlier today also hit new highs. Investors have been pouring money into commodities, seeking to beat the returns available in equities or bonds.

Oil prices have nearly tripled since 2002 and analysts see few signs of the rally coming to a halt as levels push closer to 1980 inflation-adjusted peak of $82 a barrel, setting alarm bells ringing in consuming nations.

Venezuelan President Hugo Chavez said today oil could rise even further. Speaking to reporters in Brazil, Chavez said the price of oil "could reach $100, it depends." Chavez said US threats of sanctions against Iran for its nuclear programme were contributing to record oil prices.

The surge in oil costs so far has yet to derail growth in oil demand or the world economy.

"We are not seeing any material demand destruction, even at these prices," said Finlay MacDonald at Britannic Asset Management, who helps run more than $30 billion in equities, including BP and Shell.

China, the world's second largest oil consumer, said today its gross domestic product in the first quarter had grown 10.2 per cent from a year earlier, marking a pick-up from 9.9 per cent in the fourth quarter.

The International Monetary Fund yesterday hiked its 2006 forecast for global growth to 4.9 per cent, the best since 1976 apart from 2004.

Tension over Iran's resolve to expand its nuclear work kept prices on the boil as analysts fear the dispute could worsen, cutting shipments from the world's fourth largest oil exporter. Iran has said it does not plan to cut shipments.

The country's oil minister said today that the Opec member was happy with high oil prices, displaying the Islamic Republic's increasingly hawkish stance.

"Naturally, Iran is happy," Kazem Vaziri-Hamaneh told reporters. "High prices make any supplier happy." On Wednesday, Iranian President Mahmoud Ahmadinejad was quoted by the official IRNA news agency as saying oil had not yet reached its real value, despite the recent price surge.

The perceived threat to Iranian supply comes on top of an actual disruption in Nigeria, where attacks by militants have cut the country's output by almost a quarter.

Nigerian militants killed two people in a car bomb attack on an army barracks in the oil city of Port Harcourt, extending an onslaught against the world's eighth largest oil exporter.

- REUTERS