(Adds dollar's fall after U.S. data, updates prices)
By Santosh Menon
LONDON, Jan 28 (Reuters) - Oil dropped more than a dollar to
near $89 a barrel on Monday as falling global stock markets,
amid renewed worries about the health of the global economy
[], spurred profit taking.
Expectations that OPEC is unlikely to agree to boost supply,
when ministers meet later this week, prevented deeper losses.
U.S. crude <CLc1> slid $1.51 to $89.20 a barrel by 1535 GMT.
Prices gained 14 cents last week after clawing back from a
six-week low of $86.11 a barrel.
Brent crude in London <LCOc1> was down $1.05 at $89.85 a
barrel, moving to a small premium against U.S. crude, the market
benchmark.
"Traders are squaring their positions before the OPEC
meeting, hence there is some profit-taking," said Tetsu Emori of
Japan's Astmax Futures Co Ltd.
After falling sharply early last week, as growing concern
over the U.S. economy rattled global equity markets, oil bounced
back from Thursday as U.S. legislators and the White House
hammered out a $150 billion stimulus plan. []
But with prices lately moving together with stock markets,
traders began to fear that Friday's $1.30 surge might have been
overdone after Wall Street ended the week on a weak note
following two days of sharp gains. []
Worries over the health of the U.S. economy, and with it the
global economy, hit shares across Asia and Europe and the Union
States on Monday.
The U.S. dollar fell against most major currencies amid
expectations of yet another aggressive rate cut this week by the
Federal Reserve after data showed lower-than-expected U.S. new
home sales for last month. []
While many analysts say the risk of an economic slowdown
could still take some steam out of oil prices that are not far
off their record high of $100.09, a thirst for alternative
investments and OPEC's resolve have limited the downside so far.
ATTENTION TURNS TO OPEC
Attention this week will shift to Vienna, where OPEC
ministers will meet on Feb. 1 to discuss production rates,
although the market is not expecting a boost in output.
"The U.S. inventory data and OPEC meeting are the two
important drivers of oil prices in the near term. I do not
expect OPEC to add production," said Badung Tariono, an
Amsterdam-based fund manager for ABN AMRO's energy fund.
Many officials have said they do not see the need to pump
extra oil, despite the growing threat of recession and
seasonally weak second-quarter demand, as crude inventories are
comfortable.
For OPEC ministers comments click on: []
The International Energy Agency's executive director last
week expressed concern about the world economy and said oil
producers could help the situation by pumping more.
Prices may remain hostage to the fortunes of global stock
markets, which gyrated wildly last week, forcing some oil
speculators to shed positions to cover margin calls.
U.S. regulator data on Friday showed that speculators in the
NYMEX crude oil market slashed their bets on rising prices in
the week to Jan. 22 to their lowest since mid-December, cutting
net long positions by nearly 50,000 lots to 37,000. []
"It shows the large speculative funds reducing aggressively
their net length exposure on futures through a combination of
long liquidation and fresh short positions," said Olivier Jakob
at Petromatrix.
(Additional reporting by Jonathan Leff and Felicia Loo in
Singapore; Editing by Anthony Barker)
