(Updates throughout)
LONDON, March 10 (Reuters) - Oil fell below $105 a barrel on
Monday as investors cashed in on last week's rally to record
highs that was stoked by a depressed U.S. dollar and fund flows
into commodities.
U.S. crude <CLc1> was off 82 cents at $104.33 by 1150 GMT.
Oil had hit a record $106.54 last Friday. London Brent <LCOc1>
crude was off 78 cents at $101.60.
Fears of recession, following the biggest U.S. job losses in
five years and strains in the credit market, have depressed
equities and the dollar while prompting many investors to seek
safety in commodities including oil.
"The disconnect between slowing U.S. growth and a soaring
commodity/energy complex has truly been quite remarkable," said
Edward Meir of MF Global.
The effect of the slowdown in the United States, the world's
biggest consumer of oil, could start to have an impact on
demand.
"But ... as the U.S. growth picture starts to deteriorate,
it will displace the two driving forces behind the current
commodity price surge, namely the weaker dollar and the massive
fund flows going into the sector."
A sharp drop in U.S. crude oil inventories [] and
OPEC's decision last week to hold supplies steady have also
boosted oil prices.
OPEC's president, Chakib Khelil, was quoted on Monday as
saying that speculation and political tension would keep prices
at triple digits during the current financial year.
Prices could retreat in 2009 with a recovery of the U.S.
dollar following the election of a new U.S. president, and as
fundamentals reassert themselves, he was reported as saying by
government newspaper El Moudjahid and state news agency APS.
[]
The Organization of the Petroleum Exporting Countries, which
pumps more than a third of the world's oil, has long argued the
current high prices do not reflect market fundamentals and are
being driven by speculation.
OPEC will next meet in September, although ministers could
confer informally at a conference between consumers and
producers in Rome on April 20-22.
Easing tensions between OPEC member Venezuela, a top oil
exporter to the United States, and neighbour Colombia, also kept
oil price gains in check.
The presidents of Colombia, Ecuador and Venezuela ended a
border dispute on Friday, after a week of regional diplomacy in
the face of hostile rhetoric and troop build-ups.
NYMEX crude has set an intraday record 12 times since Jan.
2, when prices first hit $100. Settlements above $100 have been
reached in nine of the last 14 sessions, the latest being
Friday's $105.15.
Crude speculators on the New York Mercantile Exchange hiked
net long positions last week, according to data from the
Commodity Futures Trading Commission released on Friday.
Net crude long positions rose to 99,539 in the week to March
4, up from 91,625 in the week to Feb. 26. But MF Global's Meir
said this was a reason for caution.
"In crude's case, net noncommercial positions have expanded
to high levels, levels that in the past have indicated signs of
a nearing top," he said.
(Additional reporting by Fayen Wong in Sydney; editing by
Anthony Barker)
