Oil prices held steady on Friday as US drivers prepared to take to the highways this holiday weekend to mark the start of the peak summer gasoline demand period in the world's top petroleum importing nation.
Steadily rising stockpiles in the US have allayed some fears of a potential shortage in gasoline that could trigger a crude price spike this summer.
London's Brent blend benchmark ended off US$0.05 at US$28.48 a barrel after shedding US$0.71 on Thursday, while US light crude was off US$0.03 at US$28.38.
Both contracts have backed down from around US$30 a barrel at the start of this week as weekly US oil inventory statistics showed a 20 million barrel surplus in supplies versus last year, cooling crude futures in the face of red-hot gasoline.
A continued deficit in ultra-clean reformulated gasoline (RFG) stockpiles against last year's already low levels encouraged the gasoline bulls, who pushed the contract briefly to a new record peak of US$1.1750 a gallon on Thursday.
The gains were short-lived, however, as dealers moved quickly to realise their profits and lock in cash ahead of the three-day weekend in both the UK and US.
Profit-taking knocked US$0.42 off gasoline on Thursday and the June contract was trading down 59 points at US$1.111 a gallon on Friday. July futures closed at US$0.97 a gallon.
US Memorial Day marks the beginning of the driving season, when millions of Americans rev up their engines and criss-cross the nation for the summer holidays.
If gasoline supplies are insufficient to meet the spike in demand, prices can soar, as they did last year. But some analysts say poor weather could help moderate immediate demand.
"While some 33 million cars are expected to hit the road this weekend ... indifferent weather conditions expected in parts of the US may reduce that total," said GNI Research analyst Lawrence Eagles.
Oil prices are unlikely to retreat too far because of the threat of major exporter Iraq cutting off supplies as the UN prepares the transition from the current phase of the oil-for-food programme to its next six-month incarnation.
The ninth phase expires on June 3 and the US and Britain are seeking to include "smart sanctions" into the next phase to ease restrictions on civilian goods imports but also crackdown on the oil smuggling to neighbours.
Iraq has rejected any resolutions that would interfere with oil-for-food and has threatened to cut off its 2.1 million barrel per day (bpd) export stream if the measures are approved as they stand.
With UN permanent council member Russia opposed to the draft, it appears increasingly unlikely the changes will be adopted ahead of the oil-for-food deadline, meaning a simple roll-over of the programme is likely.
OPEC kingpin Saudi Arabia has said that it and other cartel members would step in and fill any serious supply gaps created by a break in Iraqi exports, but the cartel appears unlikely otherwise to raise production in the short term.
Oil ministers have said they are unlikely to reverse any of this year's previous 2.5 million bpd output curbs at the June 5 meeting in Vienna, despite pleas to ensure sufficient supplies to meet the rise in winter demand.
Venezuelan Oil Minister Alvaro Silva said on Friday that OPEC's June 5-6 meeting would come too early for an output increase.
But he said the cartel would stick by its plan to trigger extra supplies once prices rise over US$28 a barrel for a basket of OPEC crudes for 20 consecutive business days.
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