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London: Oil fell more than a dollar to near $89 a barrel yesterday as falling global stock markets, amid renewed worries about the health of the global economy, spurred profit taking.
Expectations that the Organisation of Petroleum Exporting Countries (Opec) is unlikely to agree to boost supply when ministers meet later this week, prevented deeper losses.
US crude slid $1.51 to $89.20 a barrel by 1535 GMT. Prices gained 14 cents last week after clawing back from a six-week low of $86.11 a barrel.
Brent crude in London was down $1.05 at $89.85 a barrel, moving to a small premium against US crude, the market benchmark.
"Traders are squaring their positions before the Opec meeting, hence there is some profit-taking," said Tetsu Emori of Japan's Astmax Futures Co Ltd.
After falling sharply early last week, as growing concern over the US economy rattled global equity markets, oil bounced back from Thursday as US legislators and the White House hammered out a $150 billion stimulus plan.
But with prices lately moving together with stock markets, traders began to fear that Friday's $1.30 surge might have been overdone after Wall Street ended the week on a weak note following two days of sharp gains.
Worries over the health of the US economy, and with it the global economy, hit shares across Asia, Europe and the US yesterday.
The US dollar fell amid expectations of another aggressive rate cut this week by the Federal Reserve after data showed lower-than-expected US new home sales for last month.
While many analysts say the risk of a slowdown could still take some steam out of oil prices that are not far off their record high of $100.09, a thirst for alternative investments and Opec's resolve have limited the downside so far.
Focus
Attention this week will shift to Vienna, where Opec ministers will meet on February 1 to discuss production rates, although the market is not expecting a boost in output.
"The US inventory data and Opec meeting are the two important drivers of oil prices in the near term. I do not expect Opec to add production," said Badung Tariono, a fund manager for ABN Amro's energy fund.
Many officials have said they do not see the need to pump extra oil, despite the growing threat of recession and seasonally weak second-quarter demand, as inventories are comfortable.
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