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Last Updated: Friday, 4 January 2008, 10:25 GMT
Oil in retreat from record highs
Oil pump in Bahrain
Oil price briefly went above $100 on Wednesday and Thursday
Oil prices have fallen further on Friday after retreating from a record high of $100.09 overnight.

US crude fell 30 cents to $98.88 a barrel, while London's Brent declined 10 cents to $97.50.

A large decline in US crude stockpiles, which initially boosted oil prices, failed to keep them above $100.

"We have eased off from the 100 level primarily because of some profit taking," said Viktor Shum at Purvin and Gertz in Singapore.

Inventory management

For now the cartel's view is that underlying supply and demand conditions are nowhere near as tight as record oil prices would suggest
Julian Jessop, Capital Economics

"We suspect that...markets may be in for a pause here, especially now that Thursday's US stockpile figures did not provide enough of a spark to catapult a run off the $100 mark," said MF Global analyst Ed Meir.

Mr Shum added that the large decline in US crude stockpiles did not keep oil prices above $100 "because the inventory drawdown was at least in part attributed to year-end inventory management by American oil companies".

Yet trading is expected to continue to be volatile, as investors wrestle with economic and geopolitical concerns.

Meanwhile, Indonesia's Opec representative has warned that oil prices could climb as high as $110 a barrel and said the producers' cartel might raise supply when it meets on 1 February.

But other members have said that there no shortage of oil in the market and blamed rising prices on other factors.

"For now the cartel's view is that underlying supply and demand conditions are nowhere near as tight as record oil prices would suggest," said Julian Jessop, chief international economist at Capital Economics.

"But if oil prices are still around $100 a barrel in the run-up to the next Opec meeting on 1 February, we would expect quotas to be raised again," he added.



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