US oil prices backed away from five-week highs today as speculators took profits after recent gains on supply concerns for the northern hemisphere winter and violence in the Middle East.
New York crude futures were down four cents at $31.69 per barrel, a 2 per cent decline from last week's highs. London's Brent crude fell six cents to $28.99 a barrel after hitting a one-month high of $29.75 last week.
New York prices rose 12 per cent in November before speculators, including hedge funds, started to cash in the gains on Friday when crude hit $32.50 a barrel, traders said. The selling continued on Monday and has spilled over into Tuesday's trading.
However, traders said worries over winter supplies and repeated scares over supply security in the Middle East were likely to keep a floor under the market.
Dr Claude Mandil, the head of the International Energy Agency, which monitors the world's energy markets for industrialised nations, said in Tokyo on Monday that world stocks were too tight and the market would not cope with unexpected risks, like extremely cold weather.
US weekly inventory data, due for release on Wednesday, are expected to reinforce Dr Mandil's worries by showing tightening crude and distillate stocks in the world's biggest energy market.
Unrest in the Middle East, including suicide bombs in Saudi Arabia and Iraq, have bolstered concern over supplies from the volatile region, which pumps a third of the world's oil.
Iraq's northern oil export pipeline, shut since the Iraq war and hit by repeated sabotage, is not secure enough to restart despite new US-led forces deployed to guard the pipeline, a senior Iraqi oil official said yesterday.
Nonetheless, Iraq plans to raise its crude oil exports to two million barrels per day (bpd) by the first quarter of 2004, Iraqi Oil Minister Mr Ibrahim Bahr al-Uloum said yesterday. It is now exporting 1.5 million bpd, down from 2.2 million bpd before the war.