LONDON - World oil prices fell heavily on profit taking Tuesday after climbing to four-month high points in New York and London a day earlier on a prolonged cold spell in the US northeast and parts of Europe, analysts said.
New York's main contract, light sweet crude for delivery in April, tumbled 80 cents to 50.95 dollars a barrel in early dealing.
It had closed at 51.75 dollars a barrel on Monday -- the highest closing price since October 22.
In London on Tuesday, the price of Brent North Sea crude oil for delivery in April dropped 71 cents to 49.35 dollars a barrel.
"Many speculative funds and other traders are taking profits," Societe Generale analyst Frederic Lasserre said.
But prices could easily rise again should the cold weather persist long enough, he added.
A viewed shared by Jon House, an analyst with Macquarie Bank.
"Prices could rise further. I certainly think we are going to have a go to trade at all time highs. Maybe this week, maybe next," he predicted.
Traders were keeping a watchful eye on the US northeast, a key market for heating oils, analysts said.
Cold weather in the US northeast was "expected to continue into March with below-normal temperatures for the next 10 days", according to analysts at the Sucden brokerage firm.
"A long, frosty period on the US east coast will put pressure on heating oil stocks that stood 7.0 percent below year-ago levels last week.
"The US National Weather Service said (Monday) it expects US demand for heating oil to rise 14 percent above normal this week," Sucden added.
Higher oil prices had meanwhile cast doubt over a production cut when the Organisation of Oil Petroleum Exporting Countries meets on March 16 in Isfahan, Iran, analysts said.
"Recent price strength has led OPEC to back away from an output cut in the second quarter, with ministers indicating that the cartel may leave output unchanged at its next meeting in March," Sucden analysts noted.
OPEC president Sheikh Ahmad Fahd al-Sabah said Monday he would propose maintaining the cartel's current production ceiling at the meeting but would urge consideration of an increase if prices continued to rise.
"Because prices are still high, we think we have to support the idea of continuing with our ceiling and, if prices go higher, even with that, we have to study maybe increasing our production if it's necessary," said Sheikh Ahmad, who is also energy minister of Kuwait.
On Tuesday, German Chancellor Gerhard Schroeder said that rising oil prices were a threat to the global economy.
"The current prices are high which poses a danger to the world economy," Schroeder told reporters after delivering an address at Kuwait's Chamber of Commerce and Industry.
03/01/2005 17:45 GMT