* After series of 27-month highs, oil back below $90
* Selloff after recent rally pressures commodities
* Dollar's bounce helps pressure oil
* Coming up: Minutes of Fed Dec. 14 meeting, 1900 GMT
(Recasts, updates prices and market activity)
By Robert Gibbons
NEW YORK, Jan 4 (Reuters) - Oil prices plunged more than 3
percent on Tuesday, falling from a 27-month high, as
profit-taking struck the commodities complex following a series
of peaks over the thin holiday trading period.
Traders said the abrupt selling across energy, metal and
agricultural markets reflected a correction to the rally that
had capped 2010, rather than a sudden reversal of the optimism
that made commodities the top asset class last year. Trading
volume recovered to its highest levels since mid-December.
"We had an end-of-year run-up and now we are getting the
beginning-of-the year sell-off," said Stephen Schork, president
of the Schork Group in Villanova, Pennsylvania.
Additional pressure came from a rebound in the dollar,
which turned positive on an improving U.S. economic outlook.
(Graphic see: http://r.reuters.com/ces64r)
U.S. crude oil for February delivery <CLc1> fell $2.83, or
3.08 percent, to $88.72 a barrel at 12:42 p.m. EST (1742 GMT),
sliding from an intraday peak of $92.07. It was the biggest
one-day percentage decline since mid-November.
Total U.S. crude futures trading volume rebounded sharply,
after being thinned by the holidays, and was above 542,000 lots
during the noon hour in New York, already closing in on the
30-day average of 543,358 lots.
In London, ICE Brent crude for February <LCOc1> fell $1.93
to $92.91 a barrel, well off an early $95.74 peak.
Brent crude's premium to U.S. benchmark West Texas
Intermediate crude <CL-LCO1=R> rose to $4 a barrel intraday
Tuesday, the highest in two weeks, as U.S. crude prices slid
more than 2 percent. []
Copper and gold both fell more than 2 percent, while cocoa
and sugar fell by around 3 percent, in the broadest retreat in
commodity markets since a mid-November rout.
U.S. stock indexes fell as worries that rising food costs
will hit supermarket profits hurt consumer stocks and dented
optimism about the economic outlook. []
The retreat by U.S. oil futures came after they settled at
a 27-month peak above $91 a barrel on Monday as U.S. and
European manufacturing data suggested improving economic growth
that could bolster oil demand.
"Built into pricing for commodities was a premium for
flight to safety," said John Kilduff, a partner at Again
Capital LLC in New York.
"With the economic recovery now in plain view and equities
coming back into favor, that vestige of safety is losing its
appeal. It's happening with oil and there's a similar free fall
in precious metals."
Investors will be eyeing the Federal Open Market Committee
minutes from its Dec. 14 meeting for clues on the U.S. central
bank's outlook on the economy and intentions about keeping
intact recent initiatives to stimulate a faltering economic
recovery. The Fed minutes were due to be released at 2 p.m. EST
(1900 GMT).
U.S. INVENTORIES
Oil investors awaited weekly oil inventory reports, with
U.S. crude oil stocks expected to have fallen by 1.7 million
barrels last week as refiners continued to curb imports for
end-year tax considerations, a preliminary Reuters survey of
analysts showed on Monday. []
Distillate and gasoline stockpiles were expected to be
little changed, up only 300,000 barrels.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Graphic on U.S. crude stocks and price
http://r.reuters.com/keg64r
For an analysis and factbox on differences vs 2008 oil
price surge: [] []
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The industry group American Petroleum Institute's inventory
report was set for release on Tuesday at 4:30 p.m. EST (2130
GMT). The U.S. Energy Information Administration's report will
follow with government statistics at 10:30 a.m. EST (1530 GMT)
on Wednesday.
(Additional reporting by the New York Energy Desk, Dmitry
Zhdannikov in London, Alejandro Barbajosa in Singapore; Editing
by Walter Bagley)
