(Updates prices)
By Jane Merriman
LONDON, March 4 (Reuters) - Oil dropped below $100 a barrel
on Tuesday, in a retreat from a record of almost $104 a barrel
in the previous session.
The market is awaiting the outcome of an OPEC meeting on
Wednesday, where the oil producer group is expected to leave
output unchanged despite high prices.
U.S. light crude for April delivery <CLc1> was down $2.60 at
$99.85 a barrel by 1629 GMT, after touching a record high of
$103.95 on Monday.
Prices had retreated from the peak later on Monday to settle
61 cents higher at $102.45.
London Brent crude <LCOc1> was down $2.48 at $98.00.
Oil is near record highs because of long-term supply
constraints and also because of investor inflows seeking
alternatives to the dollar, equities and bonds.
"Investors concerned about inflation and the outlook for the
U.S. dollar have preferred to park their money in other assets
and commodities have been a principal beneficiary of this
trend," said David Dugdale of MFC Global Investment Management.
The dollar recovered slightly from a run of record lows
against the euro <EUR=> and a basket of currencies on Tuesday
after European officials said they were concerned about
excessive exchange rate moves. []
Concerns about the impact of a housing market slump in the
United States contributed to a steep fall in U.S. stocks.
The Dow Jones industrial average <> was down more than
one percent.
REAL ASSETS
The risk that inflation could be on the rise has increased
the attractions of "real assets" such as gold, metals and oil.
Gold <XAU=> seems likely to touch $1,000 an ounce, while
platinum has hit a record for the second day in a row
[] and copper has risen 26 percent since the start of
this year. []
But there are also views that the impact of investor flows
on the oil price has been exaggerated.
Analysts at Goldman Sachs say increased fund activity has
only played a modest part in oil's rise.
"We maintain that the recent oil price rally has been
largely fundamentally driven and that the fund buying is more
likely the result of rising prices rather than the primary
cause," they said in a research note.
Most comments from oil ministers gathering for a meeting of
the Organization of the Petroleum Exporting Countries in Vienna
on Wednesday suggest the oil producer group will not raise
output despite calls from the United States for more oil.
"I don't think OPEC would consider increasing production
because then we would be increasing to meet demand that doesn't
exist," OPEC President Chakib Khelil said. []
But Khelil, speaking in his capacity as Algerian oil
minister, said he favoured a cut in output. "I would prefer to
lower production, as Algerian minister." []
A Reuters survey found OPEC output fell slightly in
February, its first decline in six months, reflecting the view
by some analysts that OPEC members are trimming production to
prepare for seasonally lower demand in spring. []
Latest U.S. government data on domestic fuel stocks look set
to support OPEC's assertion that supplies are plentiful.
U.S. crude oil inventories are forecast to have risen last
week for the eighth week in a row, according to a preliminary
poll by Reuters. Analysts predict a 2.5 million-barrel increase
in crude stocks, a drop of 1.8 million barrels in distillates
and a 300,000-barrel build in gasoline stocks, already at a
14-year high. []. The data is due on Wednesday.
(Additional reporting by Maryelle Demongeot in Singapore,
editing by Anthony Barker)
