Crude futures edged back on Tuesday after prices had rallied to a new record high at $64,27 a barrel.
The market was still on watch for potential terrorist threats in Saudi Arabia and spirits remained dampened over refinery outages in the United States.
The US embassy and two consulates in Saudi Arabia, the world’s largest oil producer, remained closed for a second day while Britain and Australia also warned of an increased threat of terrorist attacks.
Traders were also awaiting the weekly inventory snapshot from the US, due out Wednesday, with expectations of small draws in gasoline and crude stocks, and a moderate build in distillates.
”The market is very susceptible to bullish headlines and a four-million-barrel draw in gas stocks could send prices rallying again, while a year ago a similar reading wouldn’t have triggered a price reaction,” said Orrin Middleton, energy analyst at Barclays Capital in London.
Light, sweet crude on the New York Mercantile Exchange was down 31 cents to $63,63. The contract closed at $63,94 a barrel in New York on Monday — the peak close since Nymex trading began in 1983.
Gasoline fell nearly two cents to $1,8390 a gallon (3,8 litres), while heating oil was up marginally at $1,7910 a gallon.
In London, September Brent crude futures on the International Petroleum Exchange lost 36 cents to trade at $62,34 a barrel.
The run-up in prices in the past few days has been driven more by speculation and political concerns than by market fundamentals, analysts said.
”The market is behaving rather unusually. It has been focusing on the same reasons in the past few days, selecting the bullish news while ignoring fundamental supply data to drive the market up,” said energy analyst Victor Shum at Texas-based Purvin & Gertz in Singapore.
Prices have been supported by worries that recent US refinery shutdowns — at least seven in the past two weeks — could significantly hurt supply. Barclays Capital estimated the outages affected 3% of US refining capacity.
But Shum said US gasoline inventories are only slightly lower than average and should not be threatening. Crude inventories, he said, remain at a level that is healthy enough to warrant a downward adjustment in prices, but the markets are disregarding that.
The climb in crude prices on the back of potential security issues in Saudi Arabia reflects the skittish sentiment of a market facing tight supplies and growing demand. Any threats to oil supply in key exporting countries tends to spark buying sprees because of fears that prices could soar even higher in the near term, analysts said.
Traders were also edgy over the latest developments in Iran’s standoff with the US and the European Union.
Iran’s decision to restart uranium conversion activities at its nuclear facility in Isfahan may trigger an escalation in international tensions between the Organisation of Petroleum Exporting Countries’ second-largest oil producer and the US and EU.
Britain, France and Germany called an emergency meeting of the UN nuclear agency on Tuesday to decide whether to seek UN sanctions against Tehran.
Iran insists its nuclear programme is peaceful, but Washington accuses Tehran of covertly trying to build an atomic weapon. — Sapa-AP
Associated Press writer Gillian Wong in Singapore contributed to this report