Oil prices fell $1 below record highs on Tuesday as fears over supply disruptions in Venezuela eased after President Hugo Chavez won a vote on his rule.
But traders said an expected dip in US crude oil stocks, further disruption to Iraq's oil flow and warnings that Russian firm YUKOS' financial crisis could eventually cut into oil exports, could see prices test new highs yet again.
The market has set new records in all but one of the last 12 trading sessions. US light crude oil for September shed 7 cents to $45.98 a barrel, after striking $46.91 on Monday, the highest in the 21-year history of the New York Mercantile Exchange contract.
London Brent crude for August, which expired on Monday, had also hit a new record at $44.11, before ending down 21 cents at $43.67 a barrel on Monday. The new prompt-month October contract was down 29 cents at $42.40 on Tuesday.
"US oil prices have already gone above $45 as we had predicted. Anything above that level is overbought and we could see a correction," said Tetsu Emory, chief commodities strategist at Mitsui Bussan Futures in Tokyo.
"But prices could still hit $50 if there are sudden big events such as attacks on oil infrastructure in the Middle East," he said, adding oil producers did not have spare capacity to deal with such shocks as demand stayed strong, especially from China.
"We need further explorations on oil fields to meet the demand, otherwise current levels of around $40 would continue into the next year. This is a dangerous situation," he said. Oil is up more than $10 a barrel since the start of the year. In real terms, adjusted for inflation, prices are still well below 1980's peak of $80, following the Iranian revolution. But average prices for the year to date are near matching those of 1974, the first oil shock, when crude averaged an inflation-adjusted $43 during the Arab oil embargo.
After surviving the vote, the Venezuelan leader promptly said he would guarantee oil supplies, while state oil firm PDVSA said operations were running normally.
But some concerns remained as opposition leaders vowed to prove that the referendum result was a "gigantic fraud", despite its endorsement so far by international observers.
This stirred fears of a repeat of a December 2002-January 2003 anti-government strike that halted most of the production in the world's fifth-largest crude producer. Yet, traders said attention was shifting to the US Energy Information Administration inventory data for the week ended August 13, due on Wednesday.
"The last data was surprising with an unexpected drop in crude oil inventories, and the level is likely to drop again," one trader said. "So I'm not going to change my $50 target." A Reuters survey of eight analysts showed average forecasts for a 1-million barrel fall in commercial crude stocks.
In the previous week, stocks fell 1.9 million barrels to 298.6 million barrels. Gasoline stocks were seen falling by 830,000 barrels in the latest week, while distillates were expected to show a rise of 1.3 million barrels.
The market is also edgy over the targeting of oil infrastructure by Shiite militia fighting US forces and the Iraqi government after the insurgents set fire to an oil well in southern Iraq on Monday.
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