Oil prices eased for the second day in a row on Friday after briefly hitting record territory above US$75 a barrel on geopolitical tensions and rising gasoline demand.
Meantime, natural gas futures fell to their lowest level in nearly two years as domestic supplies in storage grew to roughly 30 percent above their five-year average.
Analysts said the two-day pullback in crude-oil futures reflected profit-taking after prices had climbed for nine straight trading sessions beginning on June 21.
"The bigger trend is pretty well intact," said Michael Guido, Societe Generale's director of commodity strategy.
The ongoing nuclear standoff between the West and Iran is keeping a high floor beneath prices because of fears that sanctions imposed against Iran could prompt OPEC's No. 2 producer to withhold some of its crude from the market. Other geopolitical factors include the war in Iraq, which has hindered output there, and instability in Nigeria, which has forced the shutdown of some 500,000 barrels-a-day of oil production.
The increasing motor-fuel consumption comes despite near-US$3-a-gallon US pump prices, and analysts say even the slightest interruption to the flow of crude or refined products could push prices above that psychologically significant benchmark.
Light sweet crude for next month delivery climbed as high as US$75.78 a barrel in overnight electronic trading on the New York Mercantile Exchange before settling at US$74.09, a decline of US$1.05. The previous intraday record was US$75.40 set on Wednesday.
Nymex gasoline futures fell US$0.0196 to settle at US$$2.2394 a gallon, while heating oil futures declined US$0.0512 to close at US$2.0104 a gallon.
Oil futures are roughly 22 percent higher than a year ago and the average retail price of gasoline is US$2.94 a gallon, or 32 percent above year ago levels. But that doesn't appear to be slowing down motorists.
The Department of Energy said Thursday that US gasoline consumption over the past four weeks averaged 9.5 million barrels a day, or 1.4 percent more than a year earlier. To keep up, US refiners ran their plants at 93 percent of total capacity.
The global oil industry is pumping roughly 85 million barrels a day to meet rising demand but there is little room for error, analysts say, because the amount of spare production capacity that could be tapped in an emergency is razor thin. The same goes for the refining end of the business.
As a result, any real or feared disruptions to output can push prices sharply higher, making energy traders eager to make that bet.
"The financial players are attracted like a moth to a flame to the energy complex," said Larry Goldstein, president of the Petroleum Industry Research Foundation, a New York-based industry-financed think tank.
"If you bet right, you get unreasonably rewarded," he said.
In London, Brent crude hit a new high of US$75.09 a barrel. In later trading, August Brent on the ICE Futures exchange fell US$0.57 to settle at US$73.51.
In other Nymex trading, August natural gas futures fell US$0.141 to settle at US$5.523 per 1,000 cubic feet -- the lowest close since Sept. 27, 2004, when prices finished at US$5.262.
The US is awash in natural gas and some analysts believe there may not be enough underground storage capacity, potentially forcing some producers to shut wells. Others predict the falling price will spark demand and cause the supply overhang to be whittled away by fall.
RSS