By Ann Koh Oct. 26 (Bloomberg) -- Crude oil fell for a third day in New York after four weeks of gains pushed prices above levels justified by a recovery in demand. Oil also dropped below $80 a barrel after Nigerian rebels ordered a cease-fire and talks to end a conflict that has cut output from Africa’s biggest oil producer. “Around $80 a barrel is a price normally associated with quite tight markets and I don’t regard the oil market as tight at the moment,” said David Moore, a commodity strategist at Commonwealth Bank of Australia Ltd. in Sydney. “Maybe people are just becoming a bit more cautious about the oil price at such high levels.” Crude oil for December delivery fell as much as 93 cents, or 1.2 percent, to $79.57 a barrel on the New York Mercantile Exchange, and was at $79.99 at 3:43 p.m. Singapore time. Futures have gained 79 percent this year and touched a one-year high of $82 a barrel on Oct. 21. Prices have climbed 22 percent in the four weeks to Oct. 23. U.S. inventories of crude oil rose 1.31 million barrels to 339.1 million in the week ended Oct. 16, the highest level since August, according to a Department of Energy weekly report. The gain left stockpiles 9.4 percent above the five-year average for the period, the department said. Nigerian Output The Nigerian cease fire, which went into effect at midnight, followed an Oct. 19 meeting between President Umaru Yar’Adua and Henry Okah, leader of the Movement for the Emancipation of the Niger Delta. Okah later conveyed the government’s readiness to talk with the group’s negotiators, MEND spokesman Jomo Gbomo said yesterday in an e-mailed statement. “Nigeria would certainly be a factor in bringing the price down,” said Nick Raffan, an analyst at Fat Prophets in Sydney in an interview with Bloomberg Television. The militant group, which surfaced in January 2006 and orchestrated attacks blamed for reducing Nigeria’s oil output by more than 20 percent a year, called off a three-month cease fire on Oct. 16. Nigeria produced 1.81 million barrels of oil a day in September, according to a Bloomberg estimate. Oil is likely to become less volatile on “strong upward” momentum of prices, Stephen Schork, president of consultant Schork Group Inc. in Villanova, Pennsylvania, said in a note today. “The extant glut of crude oil around the globe notwithstanding, there is still space for a decline below the $70 level, but it is probabilistically much less viable now than it was three weeks ago,” he said. China’s Demand China’s crude oil imports rose 15 percent to 17.2 million metric tons in September from a year earlier, data from the customs office showed today. “China is recovering quite strongly at the moment and is a very big oil importer,” Raffan said. The Asian nation’s imports may reach 6 million barrels a day by 2012, he said. The global supply of light, low-sulfur or sweet, grades of crude oil may not be enough to meet demand in five years when the global economic recovery leads to an increase in diesel demand, Sonia Ka Song, the Asia-Pacific head of oil and gas at HSBC Holdings Plc in Hong Kong, said in a Bloomberg Television interview. Brent crude oil for December settlement fell as much as 77 cents, or 1 percent, to $78.15 a barrel on the ICE Futures Europe exchange in London and was at $78.57 at 3:44 p.m. Singapore time. Hedge-fund managers and other large speculators increased their net-long position in New York crude-oil futures in the week ended Oct. 20, according to U.S. Commodity Futures Trading Commission data. Speculative long positions, or bets prices will rise, outnumbered short positions by 74,383 contracts on the New York Mercantile Exchange, the Washington-based commission said in its Commitments of Traders report. Net-long positions rose by 5,547 contracts, or 8 percent, from a week earlier.

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