Oil overvalued, time to book profit

MUMBAI: Oil eased to near $77.50 a barrel on Monday, taking a breather after flirting with record highs earlier in the session on fund buying and tight North Sea crude supplies. London Brent climbed to a fresh 11-month high of $78.40 in earlier trade, just 25 cents shy of the record peak reached last August. The benchmark was trading down 26 cents at $77.31 in afternoon trade. US crude rose five cents to $73.98 a barrel.

As international crude prices hover around all-time highs, analysts say both WTI and Brent, the two benchmark crude prices, are now a bit overvalued and crude oil could give up some gains during the coming week amid a build up in the US gasoline inventory.

"Crude oil saw huge volumes towards the end of last week in the domestic market. Investors will try to book their profits during this week," said Si Kannan of Kotak Commodities. On the Multi Commodity Exchange (MCX), prices closed at Rs 2,975 per barrel last week, and traded at Rs 2,986 in the first session on Monday. The price is expected to target Rs 2,990 to Rs 3,000 per barrel on the MCX August contract during the current week, said Mr Kannan.

Brent crude futures in London for August settlement rose 0.6%, to $78.02 a barrel. This is the highest settlement price since August 7 last year, when prices closed at a record $78.30. The contract had risen 1.5% to $77.57 barrel on July 13.

In the physical market, European dated Brent made a new intra-day record on Saturday trading $79.75 a barrel after a pipeline shutdown and maintenance work reduced North Sea Brent oil production on Friday, gaining a whopping 55% from its low registered on January 16, this year.