Oil fell on Friday after supply concerns and tight inventories pushed prices to a record above $80 a barrel for the third consecutive day. Hurricane risks, falling oil and product stocks in consumer nations and a modest output increase from Opec have fuelled the recent hike in oil prices and encouraged speculators to increase long positions.
US crude settled down 99 cents at $79.10 a barrel, dragged down by late profit taking after earlier hitting a record high of $80.36. US oil hit fresh peaks over $80 on Wednesday and Thursday as well. London Brent crude fell 90 cents to $76.22 a barrel.
Three refineries in the Port Arthur, Texas-area were working to restore operations after losing power on Thursday when Hurricane Humberto battered the US Gulf Coast. The storm is now a tropical depression. The temporary loss of three refineries renewed concerns over fuel stocks in the United States, where supplies of crude fell last week to the lowest level in eight months, while gasoline stocks slid to their lowest in two years.
Total SA and Valero Energy Corp said they were restarting their Port Arthur refineries, while Royal Dutch Shell Plc said some power was restored at its Motiva Enterprises joint venture refinery.
Opec agreed this week to increase output by 500,000 barrels per day from November 1 and the group has expressed concern that turmoil in world financial markets could hurt US and global economic growth, which could dent oil demand. British mortgage lender Northern Rock was forced to turn to the Bank of England on Friday for emergency financing after being unable to secure sufficient funds in the interbank market.
Stock markets fell as the crisis at the bank renewed fears of further turmoil in global credit markets, which have been roiled by heavy losses suffered by some banks and hedge funds that invested in the US subprime mortgage sector.
The credit crunch has raised fears of a slowdown in the US housing sector hitting overall growth in the world's top oil consumer. "Although the oil markets give the impression of significant tightness, recent weekly and monthly data show US oil demand growth rates are anaemic at best. If a possible US recession ends up impacting China, the two pillars of oil demand strength would be shaken, in our view," concluded analysts at Deutsche Bank in a research note.