Brent crude oil eased towards $102 a barrel today as prices consolidated after hitting 2.5-year peaks this week, but sentiment was underpinned by spreading unrest across the key oil-producing Middle East region.
US crude also fell, but held above $86 a barrel, after jumping more than $1.00 the previous day.
Parts of the Middle East and Arab North Africa could see renewed public anger towards their governments todayas protesters in Bahrain bury four people killed when police broke up an activist camp, and after crowds have taken to the streets in Libya, Yemen and Iran in recent days.
Tensions between Israel and Iran continued to seethe amidst uncertainty about Iran's plans to send navy ships through the Suez Canal, in a move that Israel has called a "provocation".
"Short-term geopolitical nervousness will continue to underpin Brent prices, but in terms of fundamentals, support will come from the gradually recovering US economy and the ongoing momentum in China," said Dave Cohen, director at Action Economics in Singapore.
"There doesn't seem to be any dramatic development in terms of the unrest in the Middle East, so prices might take a short-term breather," he added.
Brent crude for April delivery slipped 4 cents to $102.55 a barrel by 0540 GMT, after settling $1.19 lower at $102.59. Wednesday's close of $103.78 was its highest since September 2008.
US crude for March delivery sank 18 cents to $86.18 a barrel, after settling 1.6 percent higher at $86.36, its biggest gain in two weeks. Short-covering ahead of the contract's expiry on Tuesday helped to pull prices higher.
The spread between the two grades fell below $14, after hitting a fresh record of $16.31 a barrel two days ago.
But Brent oil prices are forecast to drop later this year as analysts expect the risk premium for unrest in the Middle East to ebb, a Reuters poll showed.
US economic data released yesterday was mixed, signalling the economy was struggling to speed up recovery, but the reports provided few trading cues.
January core consumer prices rose at their quickest pace in more than a year and above expectations.
But US initial jobless benefit claims rose more than expected, while the Philadelphia Federal Reserve Bank said its business activity index increased in February to its highest reading since January 2004.
The dollar eased as the Swiss franc benefited from safe-haven appeal in the wake of the Middle East tensions and the euro gained after a solid Spanish debt auction.
The dollar index , which tracks the greenback's performance against a basket of major currencies, slipped 0.5 per cent to 77.958.
Shares in Asia's developed markets succumbed to a bout of profit taking today after posting solid gains this week.
Reuters
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