Oil prices eased slightly on Friday after the top U.S. energy official said he was confident there would be enough gasoline supply to meet peak summer driving demand.
The loss ended a week-long rally of as much as 5% that had been driven by worries that a bout of refinery problems in the world's top fuel consumer would lead to a stockpile crunch when motorists hit the road for vacation season.
U.S. crude settled down 22 cents or 0.3% a barrel to $63.63, after jumping $1.84 on Thursday. London Brent was up after earlier hitting $69.59 earlier in the day, its highest since Sept. 2006.
"I am relatively confident that we're going to continue to have supply," U.S. Energy Secretary Sam Bodman said Friday. "I'm concerned, not so much with supply as I am with prices."
U.S. gasoline inventories have slumped more than 12% since early February, fueling a 40% climb in U.S. gasoline futures and sparking forecasts of pump prices well over $3 a gallon.
"Gasoline has been at the forefront of the reasons for crude to go higher, combined with geopolitical tensions," said trader Tony Machacek of Bache Financial.
Several refineries in the United States have shut fuel-producing units in recent days, adding to heavy maintenance since early winter that has taken plants offline for planned repairs.
U.S. gasoline rose to a fresh eight-month high of $2.2134 a gallon Friday before settling 1.21 cents or 0.6% lower at $2.1740 a gallon.
Saudi Arabia Wants to Boost Production
Meanwhile, Saudi Arabia wants to increase its oil production so it can meet domestic and international demand while ensuring "fair" world prices, King Abdullah said Saturday, according to the Associated Press.
Now pumping just over 11 million barrels a day, the kingdom is the world's largest oil producer and the biggest supplier of petroleum to the U.S. The king did not say how much Saudi Arabia might increase production, but it has repeatedly said it was prepared to do so. Last May, Oil Minister Ali al-Naimi spoke of raising output to 12.5 million barrels a day by 2009.
Abdullah made his remarks in his annual address to the unelected Consultative Council, the closest thing Saudi Arabia has to a parliament. The king delivered only a summary of his speech, and the full text was distributed to journalists.
Crude prices are up more than 27% from this year's low of $49.90 in January, helped higher by unease between the West and Iran over Tehran's nuclear program and OPEC's agreed cuts of 1.7 million barrels per day.
The IEA, energy adviser to 26 wealthy nations, said crude oil output remained below what was needed to allow the usual spring build up in crude stocks.
Violence at elections in Nigeria this weekend could add to supply disruptions in Africa's biggest oil producer, but traders are not expecting trouble on a scale that would cut output much more than the loss of one fifth of capacity already factored in.
U.S. crude has been held low relative to London Brent because of high stocks at the NYMEX delivery hub at Cushing, Oklahoma, pushing Brent to a record high of $6 above U.S. crude this week.
Goldman Sachs said in a research note the weakness of U.S. crude to Brent would diminish later this year, as refinery problems are resolved and crude stocks fall. But trade sources said refinery outages in the Cushing area were still expected to rise in May.