Oil speculators took profits from a four-day rally yesterday, but the potential for supply disruptions in a market already fearing a winter fuel crunch kept prices near record highs of almost $ 60 a barrel.

US light, sweet crude for July dropped 57 cents to $ 58.80 a barrel. The expiring contract gained 90 cents in New York on Monday, having hit a record peak of $ 59.52 a barrel. August crude which becomes the top month on Wednesday, dropped 63 cents to $ 59.35 a barrel. London Brent crude weakened 50 cents to $ 57.82 a barrel.

“We may see a lot of funds selling out before it hits $60 because speculators want to tighten up their profits,” said Gerard Burg, minerals and energy economist from National Australia Bank Ltd. “But there is a considerable opportunity to exceed $60 if there are supply disruptions,” he added. Oil prices have surged more than $12, or 26 percent, over the past month as speculators bet that refiners worldwide will struggle to keep up with fuel demand this winter. Concerns over the stability of supply from key producer nations has also resurfaced recently, adding to the market’s anxiety and helping prices to a four-day, $ 4-plus rally.

In Norway, the world’s number three oil exporter behind Saudi Arabia and Russia, mediators are working to avert a potential strike by 500 technicians that could halt 920,000 barrels per day of oil output by top oil and gas firm Statoil. The deadline for a deal was set for midnight (2200 GMT) on Tuesday, a spokesman for the Norwegian Oil Industry Federation (OLF) said. The dispute was over interim adjustments to a two-year wage settlement for the offshore industry.

Islamic militant threats against western diplomatic offices in Nigeria’s biggest city Lagos on Friday spooked traders, although it did not have any impact on supplies from the world’s eighth largest exporter and key supplier to the United States. The United States reopened its consulate in Lagos on Monday.

Dealers are also keeping an eye on OPEC member Iran’s presidential run-off on Friday, as one of the candidates is hardliner Mahmoud Ahmadinejad who has expressed a desire for a fundamentalist government.

As prices soar, the Organization of Petroleum Exporting Countries (OPEC) has said it has limited means to tame the market as most producers are already pumping flat out and Saudi Arabia’s spare capacity is ill-suited to making high-demand consumer fuel.

OPEC President Sheikh Ahmad al-Fahd al-Sabah said on Monday that he would begin consultations by the end of this week on a 500,000 bpd output increase if prices did not ease, but traders doubted this would have much impact. “There is not a lot of capacity for refiners to process the heavy oil into lighter products,” Burg said.

With refineries unable to keep up with the pace of crude supplies some of that OPEC oil has headed into refiners’ stocks, which this summer hit a six-year high in the United States.

Inventories are expected to have fallen last week as refiners ramp up operations to meet strong demand growth, which so far has proven mostly immune to the impact of record high prices.

Crude stocks likely fell 1.9 million barrels last week, their third decline in a row, while distillate tanks gained 1.8 million barrels and gasoline inventories grew 200,000 barrels, a preliminary Reuters survey of analysts found. The US Energy Information Administration will release its weekly stock report at 1430 GMT today.

<B>Felicia LOO</B>