Oil prices dipped below US$63 on Friday, retracing some of the week's sharp gains made on fears of tight summer petrol supplies.
US crude CLc1 fell 81 cents at US$62.77 a barrel after climbing more than 2 per cent on Thursday. The new front-month May Brent crude contract LCOc1 fell 95 cents to US$63.26.
"Crude prices are holding on despite those bearish crude inventories," said David Thurtell, commodities strategist at the Commonwealth Bank of Australia. "The focus has definitely remained on new environmental standards and falling fuel stocks." Prices fell midweek after a US government report revealed a fifth weekly rise in crude stocks, now at seven-year highs as a warm winter allowed the world's biggest energy consumer to rebuild supplies after 2005's devastating hurricane season.
But traders have turned their attention to falling stockpiles of refined products, notably petrol, that still stand at robust levels but are being drained by an intensive refinery maintenance programme focused on new, cleaner fuel specifications.
US refiners are reducing production of petrol containing suspected carcinogen MTBE on concerns over potential lawsuits, while keeping pace with solid demand. Petrol consumption in the past four weeks has risen 2 per cent compared with last year.
Petrol HUc1 fell 1.43 cents to US$1.8601 a gallon after Thursday's 2.5 per cent rally stalled.
While reassured by sturdy inventory levels, traders have been reluctant to push oil prices much below US$60 as geopolitical turbulence casts a shadow over some of Opec's major producers.
UN Security Council ambassadors reported progress for the first time on Thursday on how to rein in Iran's nuclear ambitions, although the United States acknowledged differences remained.
Permanent members of the UN Security Council meet in New York next week to thrash out differences over the issue.
To ease concerns over the reliability of Iran and Nigeria's oil supplies, Opec has kept pumping at full throttle despite predictions for lower demand in the spring.
On Friday, the cartel cut its forecast for 2006 global oil demand growth by 110,000 barrels per day due to slower consumption in the United States and Asia.
Opec pegged global demand growth for the year at 1.46 million bpd, down from its forecast in its monthly report in February at 1.57 million bpd.