Oil Falls Off After Hitting Record

Oil prices briefly rose to a record high above $72 a barrel Thursday, then declined as traders locked in profits from recent rallies and Royal Dutch Shell said a key oil platform damaged by Hurricane Katrina would be producing at pre-Katrina levels by the end of June.

Oil prices settled at a record high for the third straight day on Wednesday after weekly government data showed a drop in U.S. gasoline stocks, raising worries that refiners don't have an adequate inventory cushion ahead of the peak summer season.

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Traders also are anxious that U.S.-led efforts to stop Iran, OPEC's second-largest member, from pursuing a suspected nuclear weapons program could lead to a disruption in Persian Gulf oil supplies.

Oil futures contracts through November 2009 are now trading above $70 a barrel, indicating traders believe high prices could be here to stay.

Gasoline inventories typically decrease this time of the year as refiners shut plants to perform maintenance ahead of the summer driving season. But there is additional worry about summer gasoline supplies this year because of the prospect of tight supplies of ethanol, which is needed in increasing amounts as refiners phase out their use of methyl tertiary butyl ether, or MTBE — an additive that helps gasoline burn more cleanly but which has been found to contaminate drinking water.

Light, sweet crude for May on the New York Mercantile Exchange rose as high as $72.49 a barrel in electronic trading in Asia, surpassing the previous record of $72.40 set during Wednesday's trading. The contract, which expires later Thursday, slipped back to $71.30, down 87 cents from Wednesday's record closing price of $72.17.

June crude, which will become the front-month contract on Friday, also slipped but remained above $73 a barrel, trading at $73.25 at midday on Nymex.

Royal Dutch Shell PLC said Thursday its Mars platform — the largest oil platform in the Gulf of Mexico damaged by Hurricane Katrina — would be producing at pre-Katrina levels by the end of June. Mars accounts for about 5 percent of total Gulf of Mexico production.

In its weekly report, the U.S. Energy Department said Wednesday that the nation's supply of gasoline shrank by a larger-than-expected 5.4 million barrels last week to 202.5 million barrels. The decline, the seventh in as many weeks, pushed gasoline stocks to 4.6 percent below year-ago levels, their lowest level since November.

Concerns about Iran continue to lift oil prices. Diplomats said Wednesday the United States may turn to the U.N. nuclear watchdog agency to exert more pressure on Iran out of frustration with Russian and Chinese opposition to firm Security Council action.

On Wednesday, Iranian President Mahmoud Ahmadinejad said record crude oil prices were still below their "real value," though he stopped short of saying Iran would use its vast resource as a weapon.

On Thursday, Hugo Chavez, president of Venezuela, one of the world's top oil producers, said oil prices would reach $100 a barrel should concern over Iran's nuclear weapons capability lead the United States to invade that Middle Eastern nation.

Chavez told reporters in Brazil that the United States' "belicose statements and the American president's threats against Iran" were responsible for the high cost of oil and added "Iran is a country that is prepared for war."

"Hopefully there will be no war, for that would destabilize the Middle East even more and could bring oil production in Iran and other countries to a complete standstill," he said.

The U.S. Energy Department report also showed that crude oil stocks fell by 800,000 barrels last week to 345.2 million barrels, while distillate stocks, which include heating oil and diesel fuel, fell 2.8 million barrels.

Brent crude for June rose to a record high of $74.22 a barrel on London's ICE Futures exchange before retreating to $73.69 a barrel Thursday.

Gasoline futures declined 5.94 cents to $2.18 a gallon midday Thursday while heating oil prices fell 2.43 cents to $2.0380 a gallon. Natural gas prices fell more than 17 cents to $8.02 per 1,000 cubic feet, after the U.S. Department of Energy said natural gas storage rose to 1.761 trillion cubic feet, more than 60 percent above the five-year average.

Though oil futures retreated, U.S. pump prices continued to rise. The average price for a gallon of gasoline rose to $2.825 a gallon, up more than 2 cents from Wednesday and more than 60 cents from a year ago, according to AAA's daily fuel gauge report.