(Recasts, updates with settlement prices, adds fresh quote)
By Robert Campbell
NEW YORK, March 17 (Reuters) - Oil fell more than 4 percent
on Monday as speculators sold oil futures to raise cash and cut
their exposure to commodities amid a broader decline in world
financial markets.
Global markets fell sharply on Monday after JPMorgan Chase
& Co <JPM.N> agreed to take over stricken investment bank Bear
Stearns <BSC.N> for a rock-bottom price of $2 a share.
[]
U.S. crude <CLc1> tumbled $4.53 or 4.11 percent in its
worst single day percentage decline in over seven months to
settle at $105.68 a barrel. London Brent crude settled down
$4.14 at $101.75 a barrel.
"In this environment, cash is king. People will be trimming
back portfolios to levels that they are more comfortable with,"
said Citigroup energy futures analyst Tim Evans.
JP Morgan agreed on Sunday to buy Bear Stearns after its
smaller rival ran into a severe liquidity crunch late last
week. At the same time, the U.S. Federal Reserve expanded
lending to securities firms for the first time since the Great
Depression in an attempt to shore up confidence. []
Oil traded in a wide range on Monday between a record high
of $111.80 to as low at $103.23 a barrel as investment funds
sold off holdings.
FUNDAMENTALS RETURN
Oil prices could come under further pressure, analysts
said, as refined products prices have fallen sharply, making it
less profitable for refiners to turn oil into fuel.
U.S. RBOB gasoline futures crashed down 18.52 cents or 6.89
percent to settle at $2.5042 a gallon, dragging the price of
RBOB gasoline below that of crude oil for the first time as
U.S. gasoline stockpiles have risen to 15-year highs.
Crude oil prices have risen over 16 percent this year,
driven in part by speculators buying oil to hedge against
inflation and the falling value of the U.S. dollar.
However, analysts say the dollar-trading play could be
running out of steam as the near collapse of Bear Stearns has
shifted investors' focus to the worsening prospects for the
global economy, which could undermine demand for commodities.
"Forget about the talk about the dollar," said Harry
Tchilinguirian with BNP Paribas. "The correction we see now
will be very similar to the one we had in January-February,
with the equity market dragging everything down."
Ministers of the Organization of the Petroleum Exporting
Countries have repeatedly said high oil prices are not related
to fundamentals, but are the result of speculation and the U.S.
dollar's fall.
"There is no problem at all with world oil inventories,"
Kuwait's acting oil minister Mohammad al-Olaim said in comments
published by state news agency KUNA on Monday.
Some oil executives have also said fundamentals of supply
and demand do not explain oil price strength.
"From the physical point of view, there is no high alarm,"
Royal Dutch Shell's Chief Executive Jeroen van der Veer said at
a news conference. "It's difficult to understand why the oil
price is where it is."
(Reporting by Robert Campbell, additional reporting by Ikuko
Kao and Alex Lawlwer in London and Osamu Tsukimori in Tokyo;
Editing by Marguerita Choy)
