Oil prices slip as traders take profits

World oil prices dipped Thursday on profit-taking, one day after soaring as OPEC held its output ceiling and the Federal Reserve expanded of its bond-buying stimulus program, dealers said.

Brent North Sea crude for January dropped 75 cents to $108.75 per barrel in late afternoon deals in London.

New York's main contract, light sweet crude for delivery in January, or West Texas Intermediate (WTI), slid 13 cents to $86.64 a barrel.

"Crude oil prices reversed and slid lower on Thursday, as some profit-taking emerged following yesterday's sharp increases," said Sucden analyst Myrto Sokou.

"There were not any crucial decisions coming out from the OPEC meeting in Vienna yesterday, while the oil market was mostly supported from Fed decisions for additional stimulus."

The market had rallied on Wednesday after OPEC held its oil output ceiling at 30 million barrels per day (mbpd) and as the dollar slipped further on the Federal Reserve's new measures.

The weak greenback makes dollar-denominated crude cheaper for buyers using stronger currencies and therefore this tends to stimulate oil demand and push prices higher.

Market sentiment remains dampened however by the looming "fiscal cliff" of automatic tax hikes and spending cuts which are due to kick in on January 1 in the United States -- which is the world's biggest oil consuming nation.

"The fiscal cliff still remains the highest priority for the short-term, while currency movements could provide further momentum to the oil market," added Sokou.

Crude futures were also weighed down on Thursday after the Organization of Petroleum Exporting Countries (OPEC) warned of an oversupply as uncertainty surrounds the outlook for the global economy, analysts said.

The losses came after "preliminary warnings from the cartel that downside demand risk was increasing", said Sanjeev Gupta, who heads the Asia-Pacific oil and gas practice at Ernst and Young.

"Markets continue to be overshadowed by concerns of looming oversupply next year with limited demand growth."

OPEC -- which produces about 35 percent of the world's oil supplies -- said on Wednesday that it was holding its oil output ceiling due to demand uncertainties.

"Indeed, the biggest challenge facing global oil markets in 2013 is uncertainty surrounding the global economy, with the fragility of the eurozone remaining a major concern," it said in a statement.

"World oil demand is forecast to increase slightly during 2013, this is likely to be more than offset by the projected increase in non-OPEC supply" such as from the United States. Projected demand for OPEC crude in 2013 is expected to contract to 29.7 mbpd."

Wednesday's gains were curbed after the US Department of Energy's weekly petroleum supplies report showed an unexpected increase in the nation's crude stocks, by 843,000 barrels, in the week ending December 7.

burs-rfj/wai

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