Oil prices fall back on profit-taking

World oil prices sank in thin year-end trade on Wednesday, as traders took profits from recent gains that were sparked by heightened tensions over key crude producing nation Iran. New York's main contract light sweet crude for February delivery, known as West Texas Intermediate (WTI), eased 50 cents to $100.84 a barrel. Brent North Sea crude for February dipped 99 cents to $108.28 in subdued afternoon London trade ahead of the New Year break. "We saw some small correction lower in the oil market, as investors were prompted to some profit-taking to lock in recent gains," said analyst Myrto Sokou at the Sucden Financial Research brokerage in London. Crude futures had rallied on Tuesday after Iran warned that it will try to close the vital Strait of Hormuz in response to further Western sanctions. However, those concerns have since eased. "Shutting down the strait ... is the last bullet that Iran has and therefore we have to express some doubt that they would do this and at the same time lose their support from China and Russia," said Petromatric analyst Olivier Jakob. Iranian Vice President Mohammad Reza Rahimi made his threat Tuesday as Tehran conducted naval war games near the Strait of Hormuz, at the entrance of the oil-rich Gulf where 40 percent of the world's oil transits. "If sanctions are adopted against Iranian oil, not a drop of oil will pass through the Strait of Hormuz," Rahimi was quoted as saying by the state news agency IRNA. "We have no desire for hostilities or violence... but the West doesn't want to go back on its plan" to impose sanctions, he said. Several Western states are considering oil sanctions against Iran over its nuclear programme, accusing it of seeking to develop nuclear weapons. The strait links the Gulf, bordered by petroleum-rich states such as Bahrain, Kuwait, Qatar, Saudi Arabia and the United Arab Emirates, with Oman. "The Christmas holiday period had some surprises for the oil market, as WTI crude oil surged on Tuesday to climb above the psychological level of $100 per barrel to hit a six-week high, mainly supported by rumours that Iran might block crude oil supplies through the Strait of Hormuz," added Sokou.