Oil futures ended firmer on yesterday after hitting some of their loftiest levels since just before the US-led war on Iraq a year ago, with gasoline prices tumbling from their record highs overnight.
US light crude settled US$0.17 a barrel higher at US$37.74. London Brent, which hit a session high of US$34.05 per barrel to mark its priciest since March 13 last year, ended down US$17 at US$33.64.
Traders said Brent's early rally was fueled by persistent concerns about low inventories of refined products ahead of the peak summer driving season.
Such worries pushed US unleaded gasoline futures overnight to a record high of US$1.1883 a gallon. They later settled down US$0.77 at US$1.1711 a gallon on pre-weekend profit-taking, but, over the week, the contract gained US$2.03.
Tension in the oil-rich Middle East added to nervousness about the adequacy of supplies in the face of strong world demand.
Despite gasoline's profit-taking slide, traders said, security concerns in Saudi Arabia, the world's largest oil producer, and continued unrest and violence in Iraq underpinned the crude market.
"Some people did not want to go home short, with everything happening in the Middle East," said Phil Flynn, a market analyst at Alaron Trading in New York.
On Thursday, the US ordered non-essential diplomats out of Saudi Arabia and warned all Americans they should leave, citing fresh signals that attacks were planned on US and Western interests.
Oil analysts interpreted the development as a warning of possible supply disruptions from the world's leading oil exporter.
At the same time, fears of further al-Qaeda attacks were stirred by a taped message, purportedly from Osama bin Laden, that set a 90-day deadline for European countries to agree to a truce.
Roger Cressey, a former White House counter-terrorism official, said the assumption should be made that al-Qaeda had "a variety of operations in the hopper right now planned."
The situation in Iraq also showed no sign of improving as US troops fought Sunni insurgents in Falluja and blasts shook Iraq's holy Shiite town of Kufa.
Meanwhile, OPEC raised its forecast of expected demand for its oil this year on expectations China's economic expansion will push world consumption growth to a four-year high.
In a monthly report, OPEC's Vienna-based secretariat raised its forecast for full-year demand for its crude oil by 230,000 barrels per day (bpd) to 26.17 million bpd.
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