(Recasts to include price fall, updates prices)
By Santosh Menon
LONDON, Jan 7 (Reuters) - Oil tumbled more than $3 to below
$95 a barrel on Monday as unseasonably warm weather and worries
of a looming recession in top oil consumer the United States
outweighed fresh tensions between Iran and the U.S.
U.S. light crude for February delivery <CLc1> fell $2.79 to
$95.12 by 1640 GMT, off lows of $94.47, extending losses from
the previous session's $1.27 decline.
London Brent crude <LCOc1> was $1.15 down at $95.64.
Heating demand will be 38.5 percent below normal this week
as temperatures rise well above normal in most parts of the
U.S., the National Weather Service forecast. Demand for heating
oil -- the favored heating fuel of the Northeast region -- is
expected to average about 40 percent below normal this week.
U.S crude had rallied briefly to a session high of $98.40 a
barrel on news of the latest geopolitical tensions, this time in
the Strait of Hormuz, a major oil shipping route in the Gulf.
Five Iranian boats made aggressive manoeuvers and showed
hostile intent against three U.S. Navy ships at the weekend in
the Strait of Hormuz, the Pentagon said on Monday.
The incident was the latest sign of tension between
Washington and Tehran, at odds over a range of issues from
Iran's nuclear program to U.S. allegations of Iranian support
for terrorism.
"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.
(Additional reporting by Fayen Wong in Sydney, Randy Fabi
in London and Robert Gibbons in New York; Editing by James
Jukwey)
