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OIL: Profit-taking interrupts oil-price surge

World oil prices eased on Friday in late profit-taking after a rally on Thursday supported by concerns over the murder of Pakistani opposition leader Benazir Bhutto and tight US energy reserves.

New York's main contract, light sweet crude oil for February, fell US$0.62 to close at US$96 per barrel. It earlier struck a one-month high of US$97.92 -- just US$1.37 away from the record of US$99.29 that was set last month.

The New York futures contract has climbed nearly US$3 over the course of four sessions in the Christmas holiday-shortened week.

In London, Brent North Sea crude for February delivery shed US$0.90 to settle at US$93.88 after hitting a one-month peak of US$95.86.

Crude futures had earlier extended Thursday's gains after two-time former Pakistani prime minister Bhutto was assassinated by a suicide bomber on Thursday.

Dealers said Bhutto's killing, which plunged the nation into crisis and sparked global condemnation and concern, would have a psychological impact on the market even though the country is not an oil producer.

"Should the geopolitical upheaval triggered by the Bhutto assassination spin out of control and lead to destabilizing antigovernment demonstrations, Pakistan will become a key bullish prop for the market," MF Global analyst Ed Meir said.

"This is not because of any oil-related ramifications, but because of the shaky ground the existing and relatively pro-Western regime will find itself in," he added.

Trade was thin, with many investors away for the New Year holiday, and geopolitical tensions helped drive prices higher, analysts said.

Traders were concerned over the security to supply amid escalating tension in crude-rich northern Iraq. On Wednesday, Turkish warplanes launched the third cross-border attack in 10 days on Kurdish guerrillas in northern Iraq.

Prices were also bolstered on Friday by huge drawdowns in US crude oil inventories.

"Oil pushed back up toward the all-time highs on the back of a bullish weekly US fuel report and as further geopolitical risk premium was added to prices following the assassination of Benazir Bhutto," Sucden analyst Nimit Khamar said in London.

The US Department of Energy's weekly energy report, released on Thursday, showed US crude reserves tumbled by 3.3 million barrels to 293.6 million barrels in the week ended Dec. 21.

That marked the sixth weekly decline in a row and was almost double market expectations of a 1.75-million-barrel drop.

US energy reserve levels are a major concern because the US is the world's biggest energy consumer.

Tetsu Emori, a fund manager with Astmax asset management in Tokyo, added that the market could also expect a fresh inflow of funds beginning around the New Year period.

"So I think the market situation should be more steady," he said. "It's quite supportive."
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