Oil prices fell from record peaks for a second session today as traders took profits from a searing rally on signs that high prices are finally starting to dampen demand.
US light, sweet crudewas down 91 cents at $51.60 a barrel, while London Brent fell $1.10 to $48.50 a barrel.
US prices have tumbled nearly $3 in two days from a record high at $54.45 after an almost unbroken $10 climb over the past four weeks.
"People were looking for $55 yesterday and when we failed to reach that level, the market went into profit-taking," said Mr Tetsu Emori, chief commodities strategist at Mitsui Bussan Futures in Tokyo.
Dealers are taking heed of the increasing threat that high energy costs pose for the global economy in the period ahead.
Oil demand will expand at a blistering 2.71 million barrels per day (bpd) this year, the fastest in 24 years, but will slow to 1.45 million bpd in 2005, weaker than first forecast due to high prices, the International Energy Agency said yesterday.
The agency also warned that China, the engine behind this year's explosive growth in fuel usage, has begun promoting fuel saving-measures and seeking alternatives to oil.
Some dealers caution that stretched world supplies may give little scope for a sustained price fall.
Short-term supply troubles haunt the market, with more than a quarter of US Gulf of Mexico production still crippled by Hurricane Ivan and Nigerian unions threatening to extend a general strike over fuel prices.
A forecast decline in weekly US distillate supplies would also highlight the potential shortfall in heating fuel stocks ahead of the northern hemisphere winter, when demand for the oil spikes in the US Northeast.
Stockpiles were six per cent below 2003 levels last week and had been slow to build due in part to last month's hurricane.
The Northeast may get a slight reprieve as the region is not expected to experience significant cold for at least another two weeks, US forecasters said last night.
Winter fuel is in short supply around the globe, with European distillate stocks 3.4 per cent below last year and kerosene supplies in Japan down 20 per cent from 2003.
The market was also supported by disruptions in Nigeria, where saboteurs set fire to a major pipeline operated by Royal Dutch/Shell
The outage will only affect 13,000 bpd after other supplies were rerouted.
This week's Nigerian general strike over fuel prices in the OPEC member has not hindered its 2.3 million bpd of production.
Unions said last night they might extend the strike past Friday, raising the risk to exports. The Nigerian government has sought a court injunction to stop the strike.