Oil slipped toward $80 a barrel on Tuesday, retreating for a third day as a strengthening dollar and concerns about the world economy prompted investors to take profits. The losses were limited, however, by news of a fire at Suncor Energy Inc's oil sands project in Alberta and foul weather in the Gulf of Mexico that had the potential to disrupt the region's oil production.
US crude settled down 19 cents at $80.05 after dropping $1.42 Monday. London Brent crude was off 26 cents at $77.38. With a credit crunch showing signs of slowing economic growth in the United States and Europe, investors have pulled back after a rally pushed oil to a record $83.90 on September 20.
Adding downward pressure Tuesday, the dollar recovered from a lifetime low versus the euro that has made dollar-denominated commodities relatively cheaper. "The price outlook is pretty bearish at this point," said Dariusz Kowalczyk, chief investment strategist at CFC Seymour.
Dealers said, however, that oil's losses were cut short Tuesday by a fire at Suncor's oil sands project in Alberta that cut some 85,000 barrels per day of output. A spokeswoman for the company, Canada's No 2 oil producer, said the fire was extinguished quickly, but added it was too early to say when full output would resume.
Adding support to oil prices was news of a cluster of squalls in the eastern Gulf of Mexico that had the potential to strengthen in the coming days. Oil operators in the Gulf of Mexico, which shut in nearly two-thirds of the region's oil output two weeks ago due to bad weather, said on Tuesday there was no impact to operations.
Traders also were awaiting US weekly oil inventory data due out Wednesday, which is expected to show a decline in crude stocks but a rise in distillate stocks. A poll of analysts forecast crude stocks to show a 800,000 barrel fall, while distillate stocks were expected to have risen 1 million barrels. Gasoline supplies were expected to have risen 200,000 barrels.
The price of oil has been above $80 for much of the last three weeks, despite Opec's agreement on September 11 to boost output by 500,000 barrels per day from November 1. Qatar's oil minister brushed aside the need for the Opec to raise output even further, saying speculative investment flowing into the market was responsible for $80-plus oil.
Venezuela's oil minister also said Opec did not need to raise output further. Analysts at Dresdner Kleinwort said short-term news was likely to be neutral to negative for oil prices. "However, we continue to see fundamentals remaining fairly tight with inventories being drawn down on a one year view. This will take a long time to ease even if Opec sets its mind to it," the bank added.
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