Oil extends fall, hovers around $ 88 a barrel

SYDNEY, Oct 22 (Reuters) Oil fell on Monday, extending the previous session's decline on profit taking from record highs, but hovered near on simmering geo-political tensions and a weak dollar.

U.S. light crude for November delivery fell 77 cents to .83 a barrel in Globex electronic trading by 0027 GMT. U.S.

oil settled down 87 cents at .60 a barrel on Friday, after touching an all-time high of .07 earlier.

London Brent crude fell 46 cents to .33 a barrel.

Analysts said oil's decline came as a surprise as news over the weekend was mostly bullish and there were no bearish factors weighing on prices.

''A possible explanation could be more profit taking or that investors are adopting a more cautious view about how tight the market will be in winter in the northern Hemisphere,'' said David Moore, a commodities analyst at the Commonwealth Bank of Australia.

U.S. oil, which has rallied more than 10 percent since Oct.

8, has averaged just over a barrel this year and is climbing towards the inflation-adjusted high of 1.70 hit in April 1980, a year after the Iranian revolution.

The weakening dollar and surging energy costs have increased worries over the health of the U.S. economy, already battered by the crisis in the subprime mortgage sector.

Despite oil's approximate SYDNEY, Oct 22 (Reuters) Oil fell on Monday, extending the previous session's decline on profit taking from record highs, but hovered near $88 on simmering geo-political tensions and a weak dollar.

U.S. light crude for November delivery fell 77 cents to $87.83 a barrel in Globex electronic trading by 0027 GMT. U.S.

oil settled down 87 cents at $88.60 a barrel on Friday, after touching an all-time high of $90.07 earlier.

London Brent crude fell 46 cents to $83.33 a barrel.

Analysts said oil's decline came as a surprise as news over the weekend was mostly bullish and there were no bearish factors weighing on prices.

''A possible explanation could be more profit taking or that investors are adopting a more cautious view about how tight the market will be in winter in the northern Hemisphere,'' said David Moore, a commodities analyst at the Commonwealth Bank of Australia.

U.S. oil, which has rallied more than 10 percent since Oct.

8, has averaged just over $67 a barrel this year and is climbing towards the inflation-adjusted high of $101.70 hit in April 1980, a year after the Iranian revolution.

The weakening dollar and surging energy costs have increased worries over the health of the U.S. economy, already battered by the crisis in the subprime mortgage sector.

Despite oil's approximate $2 slide since Friday's record $90.07 a barrel, analysts said mounting tensions between Turkey and Kurdish rebels in northern Iraq would continue to provide underlying support and keep prices close to record territory.

Turkey vowed on Sunday to take tough action after Kurdish guerillas killed 17 of its solders, but said Washington had asked it to hold back for a few days more from sending troops to the rebels' hideouts in northern Iraq.

News of Iran's chief nuclear negotiator resigning has also raised concerns of more instability in the Middle East.

Analysts said the man named to replace Ali Larijani could present the West with a harder line in a long-running dispute over Tehran's atomic ambitions.

Saturday's announcement exposed a rift over tactics with Iranian President Mahmoud Ahmadinejad, who accepted Larijani's resignation and has taken an uncompromising approach in the nuclear standoff.

A weakening U.S. dollar would also keep oil prices firm.

The U.S. dollar sank to fresh lows on Monday while the yen surged after a meeting of industrialised powers ended with no words of support for the beleaguered dollar, offering a green light to speculative sellers.

OPEC said on Friday that volatility in global oil prices reflected growing economic uncertainties in the wake of recent turmoil in credit and money markets.

Algerian Energy and Ministers Chakib Khelil said on Saturday that oil prices may rise further following their record rally last week but should ease towards the second quarter of 2008.

Reuters RKM VP0655 slide since Friday's record .07 a barrel, analysts said mounting tensions between Turkey and Kurdish rebels in northern Iraq would continue to provide underlying support and keep prices close to record territory.

Turkey vowed on Sunday to take tough action after Kurdish guerillas killed 17 of its solders, but said Washington had asked it to hold back for a few days more from sending troops to the rebels' hideouts in northern Iraq.

News of Iran's chief nuclear negotiator resigning has also raised concerns of more instability in the Middle East.

Analysts said the man named to replace Ali Larijani could present the West with a harder line in a long-running dispute over Tehran's atomic ambitions.

Saturday's announcement exposed a rift over tactics with Iranian President Mahmoud Ahmadinejad, who accepted Larijani's resignation and has taken an uncompromising approach in the nuclear standoff.

A weakening U.S. dollar would also keep oil prices firm.

The U.S. dollar sank to fresh lows on Monday while the yen surged after a meeting of industrialised powers ended with no words of support for the beleaguered dollar, offering a green light to speculative sellers.

OPEC said on Friday that volatility in global oil prices reflected growing economic uncertainties in the wake of recent turmoil in credit and money markets.

Algerian Energy and Ministers Chakib Khelil said on Saturday that oil prices may rise further following their record rally last week but should ease towards the second quarter of 2008.

Reuters RKM VP0655