LONDON (Reuters) – Oil slipped towards $81 a barrel on Monday as investors took profits from near-record highs, but a weak dollar helped stem losses sparked by worries of an economic slowdown in top consumer the United States.
U.S. crude eased 24 cents to $81.25 by 0955 GMT (5:55 a.m. EDT) after falling $1.22 on Friday, when profit-taking dragged the market back from an intraday high of $83.76. London Brent crude slipped 26 cents to $78.91.
Oil has surged more than 30 percent this year to an all-time high of $83.90 in late September on expectations of a supply shortfall in the fourth quarter as heating demand peaks.
A weaker dollar has also propped up oil and other commodities as they become cheaper for other currency holders.
An Iranian oil official said on Sunday the price of U.S. crude could gain $10 from current levels by December if the dollar continued to weaken.
“If the value of the dollar continues to drop, the price of … WTI … will reach about $90 in three months,” said Hojjatollah Ghanimifard, international affairs director of the state-owned Iranian oil company.
The dollar touched a new low against the euro and a basket of currencies early on Monday, still tumbling after data on Friday supported expectations the Federal Reserve would cut interest rates again to stimulate the economy.
Apart from a weak dollar, analysts said expectations of tightening fuel supplies heading into winter and the threat of supply disruptions due to hurricanes would also support prices in the near term.
But gains are likely to be capped by worries that high energy costs combined with a credit crunch and U.S. housing slowdown will hurt spending and drag heavily on economic growth.
Former Federal Reserve Chairman Alan Greenspan said on Monday there were signs the lending crisis was coming to an end, but warned the speculative fever must run its course to enable a full recovery.
“We have a long way to go … before house prices stabilize,” Greenspan told an audience at Reuters in London.
Speculators on the New York Mercantile Exchange crude market trimmed net long positions in the week to September 25, the Commodity Futures Trading Commission said on Friday, pressured in part by concerns of a U.S. economic slowdown.
Meanwhile, immediate hurricane threats in the Atlantic abated after several storms passed the region without damage to oil sites in the Gulf of Mexico.