US oil prices held steady yesterday, hovering close to $43 a barrel despite the previous day's sharp fall as concerns eased over any imminent disruption to already stretched global supplies.
US crude traded at $42.89 a barrel, six cents up from Wednesday when prices shot to $44.34 at one point, the highest in the 21-year history of the New York Mercantile Exchange.
Wednesday's $1.32 fall in the US benchmark came as the Opec producers' cartel reassured the market that it has one million to 1.5 million barrels of spare daily production to add to supplies if needed.
The statement reversed comments a day earlier by Opec president Purnomo Yusgiantoro that the 11-member cartel could not immediately lift output - already running by some estimates at the highest level since 1979.
A report showing rises in refined products' inventories in the United States, the biggest oil consumer, and news that Russian bailiffs have allowed the country's biggest oil company, Yukos, access to its cash reserves to ensure short-term exports also helped knock prices off the peaks.
Yukos, which accounts for one-fifth of Russian output, is battling bankruptcy from a multi-billion dollar tax debt.
"The planets lined up for the bears in the oil market yesterday and have given some relief," said David Thurtell, commodities strategist at Commonwealth Bank of Australia.
Oil prices have surged by more than one-third since the end of 2003 as fears have grown of a major glitch in the supply chain at a time when global oil demand is growing at the fastest pace in more than two decades.
Security concerns in the Middle East, especially in top crude exporter Saudi Arabia and sabotage on Iraqi oil infrastructure, as well as supply hitches in Nigeria and potential for disruptions in Venezuela have kept oil bubbling higher. Some estimates reckon that the Organisation of the Petroleum Exporting Countries is pumping at 30 million barrels per day (bpd), a level not seen since 1979.
The group set its official output ceiling at 26 million bpd from August 1, but has been running way over quotas to try and cool record oil prices. The ceiling excludes Iraq, where exports ran at about 1.5 million bpd in June.
Saudi Arabia is expected to produce 9.5 million bpd in August, one million bpd below its total capacity. The kingdom is the only Opec producer with any significant ability to raise output.
"The longer oil stays over $40 the more I expect Opec to start flagging further output increases ahead of its meeting in September. That sort of talk could bring prices back another couple of dollars," said Mr Thurtell. Opec ministers are due to review production policy on September 15.
But latest official statistics in the United States showed some fuel stocks on the rise and almost all inventories higher than levels a year ago.
The government Energy Information Administration (EIA) reported on Wednesday that gasoline and distillate stockpiles grew by more than two million barrels in the week to July 30.
The rise in gasoline stocks goes against the normal seasonal trend as demand peaks during the summer vacation months. Distillate stocks usually build this time of year ahead of winter when consumption for heating fuels reaches a peak.
Analysts said high fuel prices and sluggish economic growth had cooled consumption of gasoline.
"We have a bearish (EIA) report, particularly for gasoline. Seeing gasoline stocks building this time of year is a bit of an eye-opener," said Ed Silliere at Energy Merchant Corp.