Oil prices dipped on Thursday but remained near record highs as traders balanced a big draw in fuel stocks in the United States plus the risk of a prolonged outage in Alaska, against hope for easing Middle East violence.
London Brent crude shed 4 cents to $77.24 a barrel, extending a 27-cent loss on Wednesday but still near their record-high of $78.65 a barrel on Tuesday.
US light, sweet crude oil eased by 10 cents to $76.25 a barrel. It traded as high as $77.40 on Wednesday, just $1 below its record in July.
"Oil fundamentals are very strong but hedge funds are taking profits in the market," said Naohiro Namura, head of research and sales at Mizuho Corporate Bank.
Data on Wednesday showed an unexpectedly deep 3.2 million-barrel draw in gasoline inventories as demand remained strong and imports ebbed, while crude supplies fell 1.1 million barrels against forecasts for an 800,000 barrel-decline.
The Energy Information Administration (EIA) data does not include the partial closure of BP's Prude Bay oilfield in Alaska, the biggest in the US, accounting for 8 percent of total output.
BP began shutting down the field on Sunday and the US government said full output might not resume until early next year. BP has closed in about half of the 400,000 barrel-per-day (bpd) Prude Bay production after finding a corroded pipeline, and will make a decision on Friday whether to shut the western half of the development, where corrosion was less severe.
Alaska Governor Frank Murkowski has urged a quick resumption of production and suggested that BP misled the state with satisfactory maintenance reports.
He launched an investigation into the oil giant's handling of its pipeline corrosion. BP has been scrambling to move oil from across the world to make up for the lost production, but oil majors have not requested additional crude from Saudi Arabia, industry sources say.
Oil has soared 25 percent this year on political tensions that trader's fear could affect oil supply, including the war between Israel and Hizbollah, although news on Thursday suggested a possible easing in the violence.
Israeli Prime Minister Thud Olmert put plans for an expanded Lebanon offensive on hold on Thursday to give a chance for US-led efforts to form a peacekeeping force that could curb Hizbollah, a newspaper reported.
The paper said the suspension decision was made after midnight, hours after Olmert's security cabinet decided to deepen an already four-week-old assault on Hizbollah positions in southern Lebanon, which stoked fears of escalation.
Diplomats are still working on a UN resolution aimed at ending the war but no Security Council vote seems imminent as the US and France differ on when an international force, expected to be led by France, should move in and when Israel should withdraw.
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