* After series of 27-month highs, oil back below $90
* Sell off 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, changes byline
and moves dateline from previous LONDON)
By Robert Gibbons
NEW YORK, Jan 4 (Reuters) - Oil dropped more than 2 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.
Dealers said the abrupt selling across energy, metal and
agricultural markets reflected a correction in 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
at 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.
For a graphic see: http://r.reuters.com/ces64r
U.S. crude oil for February delivery <CLc1> fell $2.35, or
2.57 percent, to $89.20 a barrel at 11:20 a.m. EST (1620 GMT),
sliding from an intraday peak of $92.07. It was the biggest
one-day decline since mid-November.
In London, ICE Brent crude for February <LCOc1> fell $1.79
to $93.05 a barrel, well off an early $95.74 peak.
Copper and gold both fell more than 2 percent while cocoa
and sugar fell by around 3 percent in the broadest retreat in
commodity markest since a mid-November rout. But U.S. stock
indexes were little changed as optimism over the economic
outlook was offset by a decline in consumer stocks. []
The retreat by U.S. oil futures comes 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, 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 the 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 are due at 2 p.m. EST (1900 GMT).
(Additional reporting by the New York Energy Desk, Dmitry
Zhdannikov in London, Alejandro Barbajosa in Singapore, editing
by Anthony Barker)
(Reporting by Robert Gibbons, editing by Jonathan Leff)
