Oil prices drop as economic fears kill rally

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World oil prices fell on Tuesday as fresh fears about the economic recovery killed off a rally higher.

New York's main contract, light sweet crude for November delivery fell 58 cents to 75.94 dollars a barrel.

Brent North Sea crude for November dropped 43 cents to 78.13 dollars in afternoon London trading.

Analysts said energy market investors paused for breath after last week's rally, which saw oil prices surge by almost three dollars.

The market "is taking a breather. Oil in my opinion has been overbought," said Victor Shum, an analyst for energy consultancy Purvin and Gertz.

Oil prices had closed mixed on Monday amid fears for the health of the world economy.

"The market sentiment looks uncertain as the global macroeconomic picture is fairly poor following mixed economic indicators from the US and Asia," said Sucden Financial analyst Myrto Sokou.

"Investors might remain cautious amid these uncertain conditions as renewed concerns about the eurozone's economic recovery continue to dominate the markets and weigh on market sentiment," she added.

Phil Flynn, an oil analyst at PFG Best Research, said prices had risen strongly last week on the back of gold's record breaking run higher.

© 2010 AFP

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