NEW YORK – Oil prices retreated after surging above $57 a barrel Monday as the record-breaking rally over the past several days lost some momentum.
Light, sweet crude for April delivery slipped 10 cents from its all-time settlement high, set Friday, to close at $56.62 a barrel on the New York Mercantile Exchange (search), after reaching $57.12 earlier in the day.
"The market got overheated," said Ed Silliere, vice president of risk management at Energy Merchant LLC in New York. "It went too far too fast."
The benchmark oil contract set an intraday high of $57.60 per barrel last Thursday.
While the market has taken a breather, prices remain high — and on London's International Petroleum Exchange (search), Brent crude for May edged up 6 cents to settle at $55.65 a barrel.
Oil is 50 percent more expensive than a year ago but still well below the inflation-adjusted peak above $90 a barrel set in 1980.
Because there is plenty of oil on the market, crude prices should come down from current levels, Silliere said.
Still, others are doubtful that OPEC (search) will be able to soothe markets by increasing official output.
The Organization of Petroleum Exporting Countries appeared to be considering just that, with Saudi Oil Minister Ali Naimi saying it was deliberating raising daily production by an additional 500,000 barrels. That would be in addition to an increase of the same magnitude agreed to last week.
Naimi, whose country is the organization's main producer, also said Saudi Arabia was prepared to unilaterally increase its output from the present daily 9.5 million barrels to 11.5 million barrels "if we have a customer."
"You are talking to a market that is very skeptical of OPEC's ability to manage prices," said Kevin Norrish, head of commodities research at Barclays Capital in London.
Instead of reassuring markets, the increases in production are being viewed as reducing OPEC's spare capacity to meet future surges in demand, he said.
Peter Gignoux, London-based oil adviser for GDP Associates in New York said prices were high — and would remain so — because of market bullishness that did not necessarily reflect fundamentals.
"The price is being set by the futures market and by a series of beliefs that oil is a one-way bet," he said. "The traders can't lose."
Prices have risen by about a third this year, fueled by a late cold snap across the world's largest energy consumer, the United States. They also have been underpinned by a weak dollar and rising global demand at a time when there is very little excess supply available.
Prices at gas stations in the United States are at record levels, rising 13 percent in the past two weeks.
OPEC, which produces nearly 40 percent of the world's oil, first indicated Thursday it was prepared to increase output by half a million barrels a day to appease the market.
Despite OPEC's announcement, prices soared Friday.
In Jakarta on Monday, Indonesia's Oil Minister Purnomo Yusgiantoro said the cartel had done its best to lower prices — and predicted demand would ease by 1.5 million barrels in the coming months.
"Oil prices should fall during the spring considering (OPEC's planned output) hike and falling demand," said Purnomo, the group's former president.
With the world's demand at 84.3 million barrels a day, an unforeseen supply disruption later this year, such as a bad hurricane season in the Gulf of Mexico or political instability in the Middle East, Nigeria or Venezuela, could send prices even higher.
Adding to market jitters, Nigeria's two oil unions threatened Monday to embark strikes they said would involve all sectors of the oil industry, starting April 11.