(Recasts with oil fall, updates prices)
By Santosh Menon
LONDON, Jan 7 (Reuters) - Oil fell more than $1 to below $97
a barrel on Monday, handing back gains triggered by reports of
fresh tensions between Iran and the United States.
Iranian speedboats swarmed three U.S. warships in the key
Strait of Hormuz at the weekend and made threats via radio,
Pentagon officials said on Monday, confirming a CNN report.
The officials said a U.S. captain was in the process of
giving an order to fire, but the order was not carried out as
the Iranian boats moved away from the U.S. ships.
Relations between the two countries are already tense over
Iran's nuclear programme and traders said the news had helped
put the focus back on geopolitical risks in the oil market.
U.S. light crude for February delivery <CLc1> rallied
briefly to a session high of $98.40 a barrel, but by 1530 GMT,
it was down $1.35 to $96.56, extending losses from its previous
session when it fell $1.27.
London Brent crude <LCOc1> was $1.15 down at $95.64.
"We rallied off the Iranian headline, but when floor trading
opened we gave back those gains as we have temperatures warming,
the dollar showing some recovery and concerns about the
economy," said Eric Wittenauer, analyst at A.G. Edwards in St.
Louis.
Oil has eased from a record peak of $100.09 a barrel last
Thursday after a government report showed U.S. unemployment rate
up 5 percent in December, its highest in more than two years.
The bleak unemployment report was the latest signal that top
energy consumer the United States could fall into a recession
later this year.
U.S. ECONOMY
"Concerns about the U.S. economy are clearly putting some
pressure on oil prices. Some market players are also using this
opportunity to take profits," said Gerard Burg, a resource
analyst from the National Bank of Australia.
Burg said that while OPEC rumblings over the weekend had not
given any clear signal on what action the group might take at
its next meeting, there were growing expectations that it would
increase output to rein in prices.
Saudi Oil Minister Ali al-Naimi said on Sunday that the rise
in oil prices had been determined by market forces, but declined
further comment on what action the Organization of Petroleum
Exporting Countries (OPEC) would take at its next meeting on
Feb. 1 in Vienna. []
Separately, OPEC president Chakib Khelil said on Saturday he
expected oil prices to keep rising during the first quarter of
this year before stabilising in the following quarter
[].
Goldman Sachs, the most active investment bank in energy
markets, also believes oil will stay strong and has kept its
average 2008 price forecast unchanged at $95.
"We maintain that the combination of tighter short-term
fundamentals and escalating costs will continue to provide
strong support to oil prices in 2008, with the risk skewed to
the upside from current levels," it said.
Crude speculators on the New York Mercantile Exchange
boosted net long positions to a near two-month high in the week
ended Dec. 24, the Commodity Futures Trading Commission said on
Friday.
The increase in bullish sentiment came just before oil
prices hit last week's peaks.
U.S. heating demand will be 38.5 percent below
normal this week as temperatures rise well above normal in
most parts of the country, the National Weather Service forecast
in its weekly report.
Demand for heating oil -- the favored heating fuel of the
Northeast region -- is expected to average about 40 percent
below normal this week, the report added.
(Additional reporting by Fayen Wong in Sydney, Randy Fabi in
London and Robert Gibbons in New York; Editing by James Jukwey)
