World oil prices eased after striking post-Iraq war highs earlier in the day as the U.S. Northeast faces below-freezing weather.
Traders seeing opportunity to make profits after U.S. crude hit a high of $34.35 a barrel took the steam out of the rally and pushed down crude futures in London and New York, industry analysts said.
U.S. crude ended 8 cents lower at at $33.70 a barrel and Brent crude traded in London was down 7 cents at $30.82 a barrel.
“The crude oil market’s push to a new high was met by profit-taking by traders concerned that Monday’s advance left crude oil short-term overbought ahead of Wednesday’s inventory reports,” said Tim Evans, analyst at IFR Pegasus, in a research note.
Evans referred to the Monday rise of $1.26 a barrel for U.S. crude and a rise of $1.57 a barrel for Brent crude.
On Wednesday, the U.S. government and the industry-supported American Petroleum Institute will issue weekly crude inventory data. Analysts predict a slight draw in crude stocks, which are already near five-year lows.
Another reason for recent price spikes have been concern about the continued weakness of the U.S. dollar against other leading currencies, which encourages speculators to put cash into oil and other commodities, traders said.
Even with the slight daily slide, oil prices are extremely strong and are at their highest since the March invasion of Iraq, sustaining the strength that last year pushed prices to the highest annual average in more than two decades.
London Brent crude rose as high Tuesday as $31.40 a barrel.
“We are seeing prices now that we would normally see only during wars or in times of extreme political unrest,” said Frederic Lasserre, energy analyst at Societe Generale in Paris.
“The driver clearly has been U.S. heating oil, which has outperformed the rest of the complex because of low inventories and the forecasts for colder weather,” he added.
U.S. forecaster Meteorlogix predicted that the U.S. Northeast, the world’s biggest heating oil market, would see a blast of Arctic air sweeping in over the next few days. It forecast temperatures in the region eight to 15 degrees Fahrenheit below normal from Wednesday.
Oil dealers fear this will spark fresh demand at a time when inventories of crude, heating oil and natural gas are already low. The U.S. Energy Information Administration (EIA) said last week that crude inventories fell by 3.8 million barrels to stand 27 million barrels under the five-year average.
In the EIA’s next weekly report on Wednesday, analysts polled by Reuters expect the data to show a 500,000-barrel fall in crude stocks -- which if borne out would be the eighth time in the past 10 weeks crude inventories have fallen.
While oil and products supplies remain low, there is no sign that the Organization of the Petroleum Exporting Countries might consider providing more oil to world markets.
Ministers have said high prices are justified by the slide in the value of the U.S. dollar, the currency of international oil trade, which has cut cartel member countries’ purchasing power in other currencies.