Crude oil fell as much as 1.4 percent, retreating from a six-and-a-half month high, after an industry report showed that US crude oil inventories had their biggest gain in 11 months last week.
Supplies rose by 6.5 million barrels, or 2.1 percent, during the week ended Friday, the American Petroleum Institute said.
US crude oil imports plunged to a two-year low the previous week because bad weather near Houston had delayed deliveries to some of the largest US refineries.
"The APIs reflect the clearing of the fog in the Houston channel and imports rising," said Simon Games-Thomas, head of energy at NM Rothschild Australia. "There was import and off- loading disruption the week before for a few days," he said.
Crude oil for May delivery fell as much as US$0.39 to US$27.32 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It recently traded at US$27.48. Prices retreated from a 6 1/2-month high in floor trade reached yesterday on concern clashes between Israel and the Palestinians might lead to a disruption of oil shipments from the region.
The increase in supply last week left US crude oil inventories at 322 million barrels, 6.2 percent higher than a year earlier and wider than the previous week's year-on-year surplus of 4.2 percent. Most of the inventory gain, 5.41 million barrels, was recorded along the US Gulf Coast.
The supply rise came after OPEC crude oil production rose last month for the first time since August as Saudi Arabia and six other members relaxed efforts to restrict supplies and boost prices, a Bloomberg survey showed.
Daily output from all 11 members of the Organization of Petroleum Exporting Countries rose 310,000 barrels, or 1.2 percent, to 25.26 million barrels a day in March, the survey of oil companies, producers and analysts showed. The rise came during a month when oil futures traded in New York surged 21 percent.
"There is increased incentive to cheat on the production quotas when prices are this high," said Tim Evans, senior energy analyst at IFR Pegasus in New York. "It's hard for any of the members to browbeat the others because none of them has sterling compliance."
Non-OPEC member Russia, which vies with Saudi Arabia for the title of biggest oil producer, boosted output 8.7 percent in the first quarter of this year to 7.27 million barrels a day, compared with the same period of 2001, the Interfax news service reported Tuesday, citing an unidentified government official.
Russia pledged to cut oil exports by 150,000 barrels a day in the first half of the year, measuring the reduction from its October peak. The pledge avoided a conflict with OPEC, which had insisted that Russia and other exporters, including Norway and Mexico, cooperate in the effort to prop up prices.
"The latest export data from Russia tends to support the view that the Russians are only paying lip service to their promise to reduce exports," Games-Thomas said in his daily oil comment.
Gasoline inventories rose unexpectedly last week, as refiners stepped up production to take advantage of higher prices for the motor fuel, the report showed. Gasoline futures traded on the New York exchange rose 3 percent last week.
Supplies rose by 3.87 million barrels, or 1.9 percent, to 208.9 million, the institute said. Analysts surveyed by Bloomberg before the report had expected a decline of about 1.4 million barrels. Refineries operated at 87.3 percent of capacity, up from 86.3 percent the week before.
"Gasoline demand remains above year-ago levels but overall the gasoline production and imports are even further ahead of last year than the demand," said Kyle Cooper, an analyst with Salomon Smith Barney in the US.
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