Monday, June 1, 2009

Oil Falls From Seven-Month High on Signs OPEC Output Climbing

By Christian Schmollinger

June 2 (Bloomberg) -- Crude oil retreated from a seven- month high in New York on signs OPEC’s output is climbing and as traders who bet on rising prices sell futures to lock in gains.

Oil jumped as much as 3.6 percent yesterday, capping a 12 percent increase since May 21, after the U.S. and China reported increases in manufacturing activity. The Organization of Petroleum Exporting Countries raised their production by 1.5 percent in May, according to a Bloomberg News survey.

“OPEC countries are starting to see prices at $70 and then they start exerting less discipline on the quotas,” said Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne. “The price ran pretty high overnight so we may be seeing some profit-taking as people still consider the fundamentals quite weak.”

Crude oil for July delivery fell as much as 78 cents, or 1.1 percent, to $67.80 a barrel on the New York Mercantile Exchange. It was at $68.42 a barrel at 12:07 p.m. Singapore time. Yesterday, oil closed at $68.58 a barrel, the highest settlement since Nov. 4. Prices are up 53 percent this year.

Futures climbed yesterday on expectation that fuel demand will increase as the economy improves later this year. The Institute for Supply Management’s U.S. factory index strengthened to 42.8 from 40.1 in April and China’s Purchasing Manager’s Index showed manufacturing in May gained for a third month.

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