Oil fell below $66 a barrel today as new economic data showed record prices driving inflation.
Doubts that producers can pump enough oil to satisfy world demand has lifted oil more than 50 per cent this year.
But signs that record prices were beginning to crimp economic growth could slow a rally that has catapulted oil towards the $82 inflation-adjusted average in 1980, the year after the Iranian revolution.
US crude oil was 22 cents down at $65.86 a barrel, having hit a record high of $67.10 last week. London Brent crude was 36 cents lower at $64.72.
US producer prices rose a higher-than-expected one per cent in July on soaring energy costs, data showed today. Yesterday figures showed US July consumer prices rising at their fastest rate in three months and British inflation at its highest level since comparable records began in 1997.
Oil data later today will show how the US is faring after more than a dozen refinery problems hit operations in the final month of the summer driving season, contributing to the latest oil price surge.
Stocks have been inflated by the highest OPEC production in a quarter century, but fears over refinery constraints and limited spare capacity has kept oil prices supported.
Opec nudged up its forecast for world oil demand growth in 2006 on Wednesday and predicted OPEC supplies would have to offset lower-than-expected output from non-OPEC countries. The revision mirrored a similar move last week by the International Energy Agency.