Oil prices slipped back from a record on Thursday as worries over the health of the US economy resurfaced. US oil fell $1.04 to $93.49 a barrel after striking an all-time high of $96.24 a barrel. Brent crude traded down 91 cents to $89.72 a barrel after hitting a record $91.71 earlier.
The decline came as the financial sector dragged down the stock market after brokerages downgraded the two largest US banks, renewing fears of more fallout from the credit crisis. Weakness in the US economy could further slow demand growth from the world's top energy consumer.
Energy analysts added that traders were taking profits from oil's 40 percent rally since mid-August. "People are taking profits in a highly volatile market. We could see a $2-$4 trading range here for quite a while in the struggle to try to hit $100," said Scott Meyers of Pioneer Futures.
US crude's recent run up has brought it close to the inflation-adjusted high of $101.70 hit in 1980, as experts eye slimming stockpile levels in the world's major consumers.
Oil soared about 5 percent on Wednesday after US refiners drained 3.9 million barrels of crude from storage, mostly from tanks in Cushing, Oklahoma - delivery point for the NYMEX oil futures contract.
The surprise decline came at a time when the world's thirst for oil is climbing toward its seasonal fourth-quarter peak as winter arrives in the northern hemisphere. "Today's $96 oil price recognises the current tightness in market fundamentals, especially ahead of increased seasonal demand," said Robin Batchelor of global asset manager BlackRock. Opec has agreed to inject an extra 500,000 barrels per day starting in November, but has shrugged off calls for an additional hike.
Opec oil ministers blame speculators, political tensions and a weak dollar for driving up the cost of fuel and have resisted consumer calls for more oil. "The question is if there is any shortage in the supply. There is no ... shortage in crude oil," Qatar Oil Minister Abdullah al-Attiyah told reporters in Tokyo on Thursday.
"It's market-driven and the market is out of our control," he said, reiterating comments made earlier this week. Unprecedented weakness in the US currency has also recently boosted many dollar-denominated commodities and helped fuel oil's rally. Prices also were buoyed by the Federal Reserve's decision on Wednesday to lower US interest rates by a quarter percentage point to reduce the risk of a slowdown in the world's biggest economy.
Fed rate cuts have added liquidity to financial markets by making it cheaper to borrow. Analysts say some of the extra cash has been drawn to energy markets, contributing to oil's record rally. Oil in New York has more than quadrupled from below $20 a barrel in early 2002.
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