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Oil prices reverse previous gains as traders take profits

Oil prices fell on profit-taking on Thursday ahead of the Easter holiday weekend, reversing earlier gains that were linked to a massive plunge in US motor fuel reserves, traders said.

They also expressed relief that the two-week standoff between Britain and key crude producer Iran was at an end. Fifteen British naval personnel held by Iran for nearly a fortnight returned to London on Thursday.

New York's main oil futures contract, light sweet crude for delivery in May, shed US$0.10 to close at US$0.64.28 a barrel. In London, the price of Brent North Sea crude for May delivery fell US$0.16 to US$0.68.24 a barrel.

Both the New York and London markets were to be closed for the Good Friday holiday.

"While there was some relief selling on the news of the Britons' release, prices are still around three dollars higher than before they were seized on March 23," Fimat analyst John Kilduff said.

"The steep drop in [US] gasoline inventories trumped even this story. Clearly participants have refocused on the geopolitical sphere," he said.

Prices had traded in positive territory for much of Thursday as dealers digested news that US gasoline reserves plummeted by five million barrels last week -- far more than market expectations for a drop of just 300,000 barrels.

"The primary driver at the moment is the data that came out, it wrong-footed the market," Bank of Ireland analyst Paul Harris said.

"The fact it was so different from market expectations was hugely relevant coming ahead of the US driving season," he said.

Motor fuel stocks are being closely watched before the driving season, which starts next month, when many in the US hit the roads for their summer holidays.

Crude futures had struck a seven-month peak of US$69.58 a barrel in London on Monday as the crisis with Iran, the world's fourth biggest oil producer, sparked fears that the Islamic republic could disrupt exports.

Prices tumbled as low as US$66.93 in London and US$63.56 in New York on Wednesday after Iranian President Mahmoud Ahmadinejad pardoned the 15 sailors and marines as a "gift" to the British people.

"Prices have eased due to the definite, peaceful resolution of the row between Britain and Iran," said Victor Shum, an analyst with energy consultancy Purvin and Gertz in Singapore.

"But the market is still supported by enough fundamental factors to keep prices from sliding too far down, so the easing has been rather modest," he said.
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