Oil prices eased below US$65 a barrel yesterday after hitting a new intraday high of US$65.30 over gasoline supply fears.
"With stock levels looking less prettier, gasoline will remain a key concern over the coming weeks," said Orrin Middleton, energy analyst at Barclays Capital in London.
The US inventories report on Wednesday showed a decline in gasoline stocks, triggering heightened concerns that a string of refinery shutdowns in the US will make it difficult for gasoline supplies to meet peak summer demand.
Market sentiment was cooled by a report from the International Energy Agency (IEA) forecasting slower global oil demand growth this year.
The Paris-based agency said in its monthly report yesterday that oil demand this year will be 150,000 barrels a day less then it expected, as China's oil demand continues to show signs of weakening.
Nevertheless, world oil demand will grow this year by 1.6 million barrels a day to 83.7 million barrels a day, IEA said.
Light, sweet crude fell US$0.13 to US$64.77 a barrel in electronic trading on the New York Mercantile Exchange after climbing to a session high of US$65.30.
Gasoline was trading at US$1.9035 a gallon (3.8 liters), up nearly US$0.01, while heating oil was down half a cent to US$1.8348.
Brent crude for delivery next month fell US$0.01 to US$63.98 on London's International Petroleum Exchange.
The IEA also warned that despite a rapid build in oil inventories during the first half of this year, more stocks are needed.
"Stocks have built rapidly in the first half of 2005, despite US$60 oil, but clearly, the market verdict remains more inventories are needed until investment responses catch up and demand patterns are clearer," the agency said.
Crude futures have risen 14 percent in the last three weeks, driven by an array of concerns about supply disruptions: US and Venezuelan refinery outages, the Atlantic hurricane season's impact on production in the Gulf of Mexico, the death of Saudi Arabia's King Fahd as well as tensions over Iran's nuclear program.
While oil prices are about 46 percent higher than a year ago, they would need to surpass US$90 a barrel to exceed the inflation-adjusted peak set in 1980.
The weekly US petroleum supply snapshot on Wednesday showed a drop in gasoline stocks by 2.1 million barrels to 203.1 million barrels, likely the result of at least seven US refinery outages in less than three weeks. It was sixth decline in a row for gasoline inventories.
Energy markets have been extremely jumpy about the refinery outages. Some traders said the troubles are evidence that the industry and its aging infrastructure are having difficulty maintaining output at high levels.
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