US oil prices held above $40 today after shooting higher the previous day on data that showed strong demand in the United States soaking up supplies, leaving little leeway for any disruptions.
US light crude slipped three cents to $40.30 a barrel. Yesterday's rally pushed prices back towards a 21-year peak at $42.45 on June 2nd.
Brent crude traded in London also backed off, trading 17 cents down at $37.60 a barrel.
Prices soared yesterday, partly driven by new US fuel stock data from the Energy Information Administration (EIA) and after the United States warned of a large-scale attack ahead of upcoming elections in November.
US Homeland Security Secretary Mr Tom Ridge gave a warning that al-Qaeda may be planning attacks aimed at disrupting elections later this year.
"If you look at the EIA data, refinery utilistion was very high but gasoline stocks were only marginally up, that implies strong demand," said a New York-based broker. "The market is worried that if there's any refinery or import disruption, we would have significant problems with supply."
The US government EIA said yesterday that US refineries operated at an average rate of 96.7 per cent of capacity in the week to July 2nd.
It reported that national gasoline stocks rose by just one million barrels to slightly over 206 million barrels despite the high refinery production rate and imports of 1.3 million barrels per day (bpd), the second biggest weekly average on record.