Oil prices slipped on Monday but held above $49 a barrel as easing concerns about a winter supply crunch pulled the market further away from record highs set two weeks ago. US light crude fell to an intrude low of $49.28 Arabia, almost $6.50 below the all-time peak at $55.67 struck on October 25, but roughly $1 higher than on Friday's six-week low at$48.30. Prices were down 20 cents at $49.41.
Trade data released on Friday showed hedge funds had cut their long positions in New York crude oil futures to the lowest levels in a year on expectations that oil prices would weaken.
The figures from the Commodity Futures Trading Commission showed that as of November 2, speculators' net long positions were down to 5,236, the lowest since November 4, 2003.
"The longs have made pretty good profits from this market and now they're taking their money out.
Maybe the oil story has run its course," said David Thurtell, Sydney-based commodities strategist at Commonwealth Bank of Australia. "Investors may be looking at other markets now, particularly equities, if they think that oil's had its day."
Rising crude and natural gas stockpiles in the United States and signs that high energy costs are hurting economic growth have gradually eroded a rally that had lifted prices more than 50 percent this year.
The Organisation for Economic Co-operation and Development warned on Friday that growth in the group of 30 industrialised countries was likely to slow in the months ahead, which couldreduce demand for energy.
Analysts are undecided whether the recent sharp priced line marks a turning point, or just a correction to the year's breakneck rally. Edinburgh-based consultants Wood Mackenzie said in a report that a rise in production capacity of the Opec producers'cartel was likely to offer some relief to soaring prices.
Wood Mackenzie forecast Opec's output capacity to rise by more than 1.5 million barrels per day (bpd) to just over 32million bpd by the end of 2004.
"The steady rise in Opec's production capacity through the end of the year should give markets a psychological respite as the spare capacity margin widens out over the coming weeks,"Wood Mackenzie said in a report.
Robust growth in oil demand this year has forced producers to pump almost at full throttle, leaving little leeway for any disruptions in the supply chain.
A surge in output to more than 30 million bpd by the Organisation of the Petroleum Exporting Countries, which controls more than half of world exports, has helped replenishes crude stocks by 10 million barrels in the past two weeks.
This has assuaged some supply concerns that have plagued the market since September's Hurricane Ivan, which knocked out more than a quarter of Gulf of Mexico production for weeks.
As of Friday, the region's oil output had recovered to 87.5percent of its 1.7 million-bpd capacity. Iraqi crude exports from the north of the country to Turkey resumed on Friday following pipeline repairs after sabotage eats tacks.