Oil prices fell heavily from near record peaks yesterday after a sharp build in US crude stocks spurred traders to take profits from a fierce rally.
US light crude futures dropped $2.71 a barrel, or 4.9 per cent, to $52.46 a barrel, extending a slide from an all-time high of $55.67 on Monday. London Brent fell $2.11 to $49.45 after briefly touching a record peak at $51.94 a barrel.
Prices slid after the US government's Energy Information Administration (EIA) said crude stocks rose four million barrels to 283.4 million barrels, narrowing a deficit against last year to nine million barrels.
Oil prices have surged more than 60 per cent this year, driven by blistering demand growth that has pushed global production to its limit and fuelled fears that refiners have not made enough heating oil to last the winter.
While the EIA showed heating oil stocks down 600,000 barrels to 48.9 million, some 15 per cent below last year, analysts said that in the absence of a cold snap, heating oil stocks should now start to grow as refineries return from seasonal maintenance.
"We're still losing ground on distillates, but that should probably improve in the coming weeks with refinery runs going up," said Mr Phil Flynn, analyst at Alaron trading in Chicago.
As world concern grows over higher energy costs, the OPEC producer cartel took the unprecedented step of urging the United States to tap its emergency crude reserves to bring down prices.
Mr Purnomo Yusgiantoro, the president of the Organisation of the Petroleum Exporting Countries, said yesterday he had approached Washington to suggest the move to force prices down.
"We had communication with them. I asked them to use their reserves," Mr Purnomo, Indonesia's oil minister, said in Jakarta.
A White House spokesman said the Bush administration would not use the Strategic Petroleum Reserve to influence market prices. The US says only a severe supply disruption would warrant a release.
OPEC usually regards government stockpiles as a threat to its own market influence, but the cartel worries that sustained higher oil prices could eat into future demand growth by spurring use of alternative fuels.
