Oil prices head south,

Peak oil pundits with short positions leap from windows as oil loses 10%.

The 10 % fall since the start of the year -- the most dramatic loss since December 2004 according to Reuters data -- is out of proportion to any fundamental weakness and has spread to the wider commodities asset class.

US crude was hovering above $55 a barrel on Friday, a key technical level, which if convincingly broken could pave the way for a deeper decline.

"Our view is the price will likely be rangebound between $55-$65 a barrel this year versus the $66 a barrel average in 2006," he said. But in the immediate term, there was also a risk of further hedge fund selling following an increase in levels of open interest, or positions that have not yet been liquidated.

"There is still the potential for a further correction. It's never a good sign when there is a big drop like this with rising levels of open interest," said Olivier Jakob, analyst at Petromatrix in Switzerland. He said a close below $55 could pave the way for a move down to $50 a barrel.

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