Oil prices fell $1 on Thursday on expectations US crude inventories would rebound from a sharp drawdown last week that was caused by a temporary closure of the nation's biggest oil port. US crude settled down $1.04 to $60.36 a barrel, partly unravelling Wednesday's rise of more than $2. London Brent crude fell $1.28 to $60.77.
US prices hit $61.65 on Wednesday, their highest since October 2, after government data showed US crude stockpiles fell sharply last week. The market had expected stocks to rise.
The drop in crude inventories followed the closure of the Louisiana Offshore Oil Port, the country's largest oil import facility, for three days last week due to bad weather. But the port has since caught up with delayed loadings and analysts expect supplies to return to normal quickly.
"There could be some giveback in inventories if the LOOP was able to catch up with what was delayed," said Jason Schenker, economist with Wachovia Bank in Charlotte, North Carolina. Losses Thursday were tempered by worries that US inventories could shrink heading into winter if oil cartel Opec honours the agreement it made last week to cut output by 1.2 million barrels per day (bpd). Traders have questioned Opec's ability to enforce output discipline. But increasing evidence of the cartel's determination to prop up prices has helped US crude recover from a 2006 low of $56.55 a barrel hit last week.
Leading Opec member Saudi Arabia and the second biggest Opec producer, Iran, have informed their customers of reduced November supplies, as has the United Arab Emirates. On Thursday, Libya and Kuwait became the latest Opec producers to disclose production cuts.
Claude Mandil, the executive director of the International Energy Agency, which advises consumer nations on energy policy, said on Thursday oil prices were still "very excessive" and warned Opec that its cuts could be damaging.
"From Opec's point of view, they should be careful ... these are prices that hurt economies, essentially the economies of the least developed countries," Mandil told France's BFM radio. Separately, US government data released on Thursday showed US natural gas storage up 19 billion cubic feet (bcf) to a record high level for this time of year.