Oil Off on Profit-Taking, Demand View

NEW YORK -

Oil futures fell Friday as traders sold to book profits from crude's recent 10 percent price rally and fretted about data suggesting demand for oil is falling.

OPEC offered the oil market mixed news, trimming its demand forecasts for this year by 100,000 barrels a day but hinting that it may cut production if global supplies of crude continue to rise, according to Dow Jones Newswires.

"It's always on the mind of traders what OPEC is going to do," said Addison Armstrong, director of exchange traded markets at TFS Energy Futures LLC in Stamford, Conn.

Earlier in the week, prices rose on Venezuelan President Hugo Chavez's threat to cut off oil shipments to the United States in retaliation for Exxon Mobil Corp. (nyse: XOM - news - people )'s success in convincing courts in the U.S. and Europe to freeze Venezuelan assets. Exxon has taken Venezuela to court over last year's nationalization of an oil field.

Several reports in recent days have suggested that economic conditions may not be deteriorating as quickly as feared. On Friday, the Federal Reserve said industrial production rose last month in line with analyst expectations. But the Energy Department, the International Energy (otcbb: IENI.OB - news - people ) Agency and now the Organization of Petroleum Exporting Countries have all cut demand growth forecasts for this year. At the same time, domestic oil supplies have risen for several weeks.

Light, sweet crude for March delivery fell 69 cents to $94.77 on the New York Mercantile Exchange after rising by more than $1 earlier. Through Thursday, oil prices rose more than $8 in little more than a week.

In recent days, many analysts have questioned oil's price strength in the face of falling demand.

"It makes no sense," said Tom Kloza, publisher and chief oil analyst at the Oil Price Information Service in Wall, N.J., who suggested speculators may be behind the recent rise. "I think it's financial and it's speculative."

Markets that rise quickly on speculative money often fall even faster, analysts say.

At the pump, meanwhile, gas prices rose 0.5 cent overnight to a national average of $2.984 a gallon, according to AAA and the Oil Price Information Service. Retail prices, which typically lag the futures market, have drifted higher in recent days, following oil's recent rally.

Other energy futures also fell Friday. March gasoline futures dipped 0.58 cent to $2.4703 a gallon on the Nymex, and March heating oil fell 3.48 cents to $2.6318 a gallon. March natural gas fell 10.7 cents to $8.665 per 1,000 cubic feet.

In London, April Brent crude futures fell $1.03 to $94.13 a barrel on the ICE Futures exchange.