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Last Updated: Friday, 7 December 2007, 21:33 GMT
Oil price lower in volatile trade
oil rig
Fears of supply shortages continue to cast a shadow over oil prices
Oil prices have fallen below $90, weighed down by a stronger dollar at the end of a volatile week's trading.

A barrel of New York light crude closed down $1.95, or 2.2%, at $88.28, while Brent crude was down $1.54 at $88.64.

On Friday, a US government jobs report was better than many analysts had expected, boosting the dollar's value.

Oil prices have swung sharply in the past week, pushed and pulled by news about Iran, the US economy and an Opec decision not to increase crude output.

"The movements of the last few days are not necessarily logical," said Mike Wittner, an analyst at Societe Generale.

"There are a lot of question marks out there."

Volatile trade

Earlier in the week, prices fell following a report that downplayed Iran's nuclear ambitions.

Prices then swung higher again on signs that the US would sustain its pressure on Iran despite this report.

Energy traders fear that a conflict between Iran, and the US and its allies could hurt oil supplies from the Middle East.

The announcement late on Thursday of an aid plan for many US mortgage holders also supported oil prices.

It helped sooth fears that the crisis in the mortgage sector would feed into the wider economy and reduce demand for oil.

The fact that employers created more jobs than expected last month fostered hopes that the Federal Reserve will deliver a smaller-than-expected rate cut when it meets next Tuesday, news that boosted the dollar.

Cartel decision

This week's decision by oil production cartel Opec to sustain output at current levels - combined with falling US inventories - had set the stage for oil prices to rise again, some analysts said.

But the rally proved to be short lived.

"Lack of follow through after yesterday's run up may have caused this drop below $90," said Eric Wittenauer, analyst at A.G Edwards.

Opec will next meet on 1 February to review its decision.

It said there was no reason for prices to hit $100 a barrel as there were enough oil stocks to meet demand.

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