Oil fell yesterday, extending a sell-off from record highs on concerns about the state of the US economy and a recovery in the dollar, amid hopes that Turkey will refrain from military action against Kurdish rebels.
US light crude for December delivery fell US26c to US$85.76 ($114.2) a barrel, down about US$2.07 from around the same time on Monday, despite a slight rebound in US equities.
Oil has lost more than US$4 since hitting a record high of US$90.07 on Friday, and fell on Monday along with other commodities including gold, as well as corn and soybeans, on the back of the dollar's rebound from a record low against the euro.
London Brent crude fell US36c to US$82.91 a barrel.
The levels were still up about 5 per cent from the beginning of the month and 40 per cent from the start of the year, buoyed by worries about insufficient energy inventories during the Northern Hemisphere's winter and geopolitical concerns.
"Oil markets will continue to have an eye on geopolitical developments, especially the current tensions between Turkey and Kurdish rebels in Iraq," said Commonwealth Bank Australia commodities strategist David Moore in a note to clients.
But the market is looking for a breather from an expected second-straight week of higher US crude oil stocks, even though the rise for the latest week is seen at just 100,000 barrels, after a 1.8 million-barrel build in the week ended October 12.
Analysts have credited the tension between Iraq and Turkey as one factor behind oil's rise.