Oil prices eased on Wednesday after a US government report showed crude stockpiles in the world's largest energy consumer rose last week to their highest level since 1998.
But the drop in oil prices, which are still within grasp of a record over $70 a barrel, was limited by lingering concerns over Iran, gasoline availability this summer and interest in the energy sector among big money funds.
US crude prices fell 36 cents to $68.62 a barrel, about $2 below the all-time high struck last summer after Hurricane Katrina toppled US offshore oil rigs and crippled refineries along the Gulf Coast.
In London, Brent crude firmed 5 cents to settle at $69.42.
The US Energy Information Administration said on Wednesday crude inventories in US commercial storage rose by 3.2 million barrels last week to 346 million, the highest level in nearly eight years.
Oil prices in 1998 were about $15 a barrel, but energy analysts say uncertainty over foreign oil supplies and rapid global demand growth make it all but impossible consumers will see prices that low again.
Iran declared on Tuesday that it had produced its first batch of enriched uranium, drawing fire from the world's leading powers, which have tried to keep Tehran from pursuing its atomic program.
"As long as we have this face-off with Iran, it doesn't matter much how much crude supply we have in the tank," said Bill Ferer, president of investment firm W.H. Reeves and Co in New Jersey. "The unstated threat of nukes in the Middle East trumps high inventories."
The mild decline in crude prices Wednesday was also tempered by fears over potential supply disruptions for gasoline this summer, as US refiners eliminate additive MTBE in favour of ethanol.
US gasoline inventories fell last week by 3.9 million barrels, the EIA said.
"The switch from MTBE to ethanol is a localised problem, but we're just going to have enough regionalised supply dislocation to keep a bid under this gasoline market until we get through the transition," said Jim Ritterbusch, president of Ritterbusch and Associates.
US oil prices reached as high as $69.60 earlier in the session, the highest level since September 2.
The International Energy Agency said the Organisation of Petroleum Exporting Countries, already pumping near capacity, would have to pump more in 2006 to fill a gap from Russia and other suppliers.
Most Opec members are already producing close to the limit and the group has missed its output target of 28 million barrels per day every month this year, mainly because rebels have shut a quarter of Nigeria's output. The IEA pitched 2006 demand for Opec oil even higher - at 29.4 million bpd.
Oil is riding a rally that has seen it jump about $50 a barrel since the start of 2002, with investors driving commodities toward record highs and the global economy and growing demand so far proving resilient to soaring fuel costs.
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