Oil fell on Thursday, dragged down by gasoline futures as US refiners made progress in restarting operations following Hurricane Ike. US crude fell 79 cents at $96.37 a barrel at 1644 GMT, after touching a high of $102.24 earlier. It had gained $6 on Wednesday. London Brent crude traded down 45 cents to $94.39 a barrel.
Gasoline futures dragged crude down from earlier highs as energy companies continued work to restore operations shut by Hurricane Ike. Five of the 16 refineries closed by Ike have restarted.
"(US) Refineries are starting to restart, the pipeline systems are coming back up in an orderly fashion and there is going to be an influx of cargoes, so RBOB (gasoline futures) seems to be leading crude lower," said Jim Ritterbusch, president at Ritterbusch and Associates in Galena, Illinois.
Prices had soared back above the psychological $100 a barrel level early in the session as a move by global central banks to add liquidity to money markets rallied world stocks. However, concerns over the fate of US investment bank Morgan Stanley - a major player in energy markets - has kept price gains in check.
Reports that the No 2 US investment bank, whose shares are down 50 percent this month, could be up for sale and bought by regional banking powerhouse Wachovia Corp have unnerved markets. Morgan Stanley withdrew from a half-hour oil trading window - used to assess benchmark prices - after pricing agency Platts placed it under review because of counter-party concerns over its credit status, two industry sources said on Thursday.
The Platts review does not stop Morgan Stanley trading oil, but means that its bids and offers will not be taken into account during the daily half-hour "window" during which Platts assesses prices in over-the-counter oil markets. The strife on financial markets this week had pushed crude down 10 percent on Monday and Tuesday as investors fled oil for safer havens, with concerns the fallout from the recent turmoil could dent energy demand.
Investors flocked to oil and other commodities earlier this year as a hedge against falling equities and a weak dollar, sending crude to a peak over $147 in July before slowing demand in consumer nations sent prices tumbling. Some market analysts were unconvinced that oil would see the same kind of safe haven flows during the latest round of the credit-crunch.
"Its place as a hedge against this crisis has run its course," said Alaron trading analyst Phil Flynn. "If there is no money to lend to build factories or buy Chinese goods then why in the world will we need so much oil?"
Rising tensions in Nigeria's crude rich Niger Delta region also lent support, with militants threatening on Wednesday to broaden their "oil war" to offshore oilfields. The Movement for the Emancipation of the Niger Delta has cut one-fifth of Opec member Nigeria's oil output.
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