World oil prices tumble

Oil fell $4 from record highs on Monday on the stronger dollar and profit-taking after surging an unprecedented $16 in the previous two sessions. The slide came after oil jumped nearly $11 on Friday alone as the dollar weakened and on forecasts of falling inventories in the United States and weak supply.
US crude settled down $4.19 at $134.35, off the record high $139.12 hit on Friday. London Brent crude dropped $3.78 to settle at $133.91 a barrel. Oil has surged more than 40 percent this year as investors pour into commodities as a hedge against the weak dollar and inflation. The dollar firmed on Monday after US Treasury Secretary Henry Paulson did not rule out intervening in currency markets to stabilise the greenback, adding the Bush administration was "focused" on both the dollar and oil prices.
Dallas Federal Reserve Bank President Richard Fisher warned a weak dollar can create a "negative feedback loop" spurring inflation and sapping growth, as he left the threat of currency intervention hanging.
"After the exaggerated move up last week, most expected the market would come off some. Any chatter supportive to the dollar is going to be bearish for commodities in general and crude oil in particular," said Eric Wittenauer, analyst at Wachovia Securities in St. Louis.
The rise of investor flows has added to a six-year rally sparked by concerns demand from emerging economies such as China would outpace supply growth, sending oil prices up seven-fold since 2002. A forecast from Morgan Stanley that the diversion of Middle East crude away from the United States to Asia should draw down inventories in the world's top consumer and send prices to $150 a barrel by July 4 helped spark last week's late rally.
Goldman Sachs said production declines from Mexico, Russia, Venezuela and the North Sea were supporting prices. "Evidence of a structural decline in supply are mounting," the bank said in a Monday report. "The higher-than-expected decline rates in these critical regions are already contributing to keep US import levels extremely low, ultimately tightening US oil fundamentals."
Skyrocketing fuel costs have already begun to erode demand in consuming nations such as the United States and Britain, and moves by emerging economies like India and Malaysia to cut fuel subsidies could also dent demand, analysts warn.
Opec ministers insist there is enough in the market, and blame rising prices on speculators. Saudi Arabia Oil Minister Ali al-Naimi said at the weekend the current price rise was unjustified, the official Saudi Press Agency reported. The Cabinet of the top oil exporter said on Monday it will call for a meeting between producing and consuming nations to discuss prices.
High oil prices have sparked protests around the globe, from the United States to Europe to India and Indonesia. Opec President Chakib Khelil on Monday said that, but for the weak dollar, political tensions and speculation, oil prices would probably be around $70 a barrel.