Oil dipped further below $63 on 27 March after hitting a 2007 high the previous day on the widening political dispute between Iran and the West and concerns over supply in the United States due to refinery glitches.
US light, sweet crude for May delivery was trading down 23 cents at $62.68 a barrel by 0635 GMT, while Brent crude shed 18 cents to $64.23, with some traders locking away profits after a four-day rally that boosted Brent by over $4.
Prices on 26 March struck their highest levels this year as dealers factored in greater Middle East supply insecurity.
Iranian Naval Revolutionary Guards units seized 15 British sailors and marines in the Gulf on Friday, a day before the United Nations imposed new sanctions on OPEC producer Iran over its nuclear programme.
The stand-off between Western nations and the world’s fourth-largest oil producer has compounded market supply fears, although there has been no disruption to Iran’s daily exports of around 2.2 million barrels.
“The market reacted immediately to the political tension,” said Hiroyuki Kitakata, analyst at Barclays Capital.But fundamentals also aided the rally, with falling gasoline stocks and fresh refinery glitches threatening to put motor fuel supplies under strain during the peak summer demand season.
Gasoline futures led gains on 26 March, striking a seven-month high amid refinery snags and as analysts forecast data due for release on Wednesday to show a 2.3 million-barrel drop in stocks of the motor fuel last week. Gasoline futures were softer at $2.0648 on Tuesday.
BP Plc reduced rates to the 175,000 barrels per day (bpd) gasoline-making unit at its refinery in Indiana, the fifth largest in the United States, following a small fire on Thursday, trade sources said.
The high oil prices have prompted the head of the International Energy Agency to urge OPEC to raise output.
The Organization of the Petroleum Exporting Countries recently agreed to keep existing oil output curbs, after cutting supply by a total of 1.7 million bpd in two stages starting 1November and 1 February this year.
“OPEC has already tightened supply, and with strong demand, I predict prices will go above $70 before summer,” Kitakata said.