Global crude oil prices jumped yesterday amid rising tension in the Middle East and concern that the US is planning a new wave of attacks on Iraq.
In London, Brent crude for April delivery was up 72 cents at $24.05 a barrel late in the session but eased back to $23.33 nearer the close.
By early afternoon in New York, Nymex crude was up 70 cents to $24.55 but retreated to $23.84.
Analysts said prices might have peaked when they topped $24 and could move lower ahead of a meeting of the Organisation of Petroleum Exporting Countries in Vienna on Friday.
The threat of military action as the US demands the return to Iraq of UN weapons inspectors has helped crude's rise, but OPEC's meeting is unlikely to provide clues on the direction of prices, analysts said.
"Oil at $24 a barrel probably includes a $3 war premium and leaves some room for a near-term downward move in the absence of imminent military action," said Mr Adam Sieminski, at Deutsche Banc Alex Brown.
OPEC's meeting is expected to extend the current 21.7 million b/d production ceiling through the second quarter. OPEC implemented a 1.5 million b/d cut in January in an attempt to help crude prices climb to a range of $22 to $28. Some ministers believe the ceiling could be extended until the year-end.
Mr Matthew Warburton at UBS Warburg said while OPEC was unlikely to change its quotas on Friday, it was likely to increase them by one million b/d in June, as demand for OPEC crude increases.
He said February and March could mark the low point in OPEC production.
Mr Sieminski said production was likely to be relatively steady in the second quarter, especially if prices stayed above $20 a barrel.
Despite attempts by the UN to avert US military action towards Iraq last week, crude oil prices reached their highest since September 11th. Prices had slumped to a two-year low after the terrorist attacks, as the economy slowed and airlines cut flights. The International Energy Agency last week said OPEC production should increase by almost one million b/d in the second half of 2002, or risk slowing the economic recovery. - (Financial Times Service)
