NEW YORK – The price of crude oil fell $2 to under $63 a barrel Monday as skepticism over Iran's claim that it has begun enriching uranium on an industrial scale sank an early rally.
President Mahmoud Ahmadinejad said at a ceremony Monday at an enrichment facility at Natanz that Iran was now capable of enriching nuclear fuel using 3,000 centrifuges. Some experts said the announced capabilities would fall far short of the material needed to run the plant.
Light, sweet crude for May delivery fell $2.02 to $62.26 a barrel in midday electronic trading on the New York Mercantile Exchange.
Brent crude for May fell $1.01 to $66.86 a barrel in electronic trading on London's ICE Futures Exchange.
Traders overreacted to the news out of Iran, sparking an early spurt of buying that reversed itself as Tehran's claims came into question, said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.
Coupled with decreased volume after the holiday weekend, the markets were left with no one to step in and buy, he said.
"When you get light volume, little stories like this have heavy effects on the markets," Flynn said.
Oil prices rose more than $5 a barrel — hitting six-month highs — after Iran's March 23 detention of 15 British sailors and marines. The market immediately fell following their release Thursday, but trading was stopped from Friday for the long Easter weekend.
In the U.S., imports of brent crude are down as traders favor selling at premium prices in Europe, where supplies are tight and demand is up, Flynn said.
Meanwhile, refineries in Texas are scrambling to keep up with record demands in the U.S. as production problems persist, he said.
Gas prices could remain higher even after the refineries come back online, as the usual slack in demand between the winter heating season and summer driving months has yet to materialize, he said.
"Historically, we've never had this kind of demand," Flynn said. "We really don't know how much it's going to fall. The refineries will be playing catch-up all summer."
Last week's annual report by the U.S. Energy Information Administration showed a larger-than-expected increase in gasoline supplies but lower refinery output. The price of unleaded gasoline rose 1.87 cent Monday to $2.1475 a barrel.
The refinery problems have prompted traders in the physical market to look overseas — which, combined with increased demand in Europe, has driven the price of oil traded in London up over $68 a barrel, higher than in New York.
In other Nymex trading, natural gas rose 4.3 cents to $7.650 per 1,000 cubic feet, and heating oil futures were down 0.08 cent at $1.8617 a gallon.