Oil prices turned down sharply yesterday losing most of the ground they had gained since last weekend after a US Government reports showed a surprise increase in gasoline stocks, easing worries of a squeeze on supplies as Americans start driving greater distances in the summer when demand for petrol peaks.
Gasoline stocks rose by 2.1 million barrels in the latest week, the first increase in nine weeks, when another decline had been expected, according to the US Energy Information Administration.
"The latest report from the EIA could be a sign that we've really turned the corner on refineries," said Phil Flynn, an analyst at Alaron Trading in Chicago.
"Barring any new headlines of refinery trouble or some strong geopolitical developments from Iran or any other big producer, we may have seen the top for crude oil at this point."
US light, sweet crude finished $1.56 lower at $73.05 a barrel. Earlier in the day, prices had risen as high as $74.99, apparently heading back to the all-time peak of $75.35 hit on April 24.
In London's Brent crude traded at $73.40, down $1.24, having earlier matched Tuesday's record of $74.97.
The morning increase was driven by mounting tension over Iran's nuclear programme and a fresh surge of fund investment that also lifted gold to a 25-year high with help from a weak dollar, and sent platinum to a new all-time record.
The US data showed crude oil stocks 1.7 million barrels higher on the week, confounding expectations of a 100,000-barrel decline.
But dealers were still watching closely for developments in the West's efforts to check Iran's nuclear ambitions.
The US, Britain and France were set to brief the United Nations Security Council on their proposed resolution that would give Iran another chance to curb its nuclear programme.
But the Western powers were not expected to distribute a text that Russia and China still oppose, fearing it would be a step toward sanctions or even military action, even though the draft is thought not to threaten either.
The UN meeting coincided with the arrival in Washington of the German Chancellor Angela Merkel to discuss Iran strategy with President Bush.
German officials say she hopes to persuade Bush to take a methodical approach on Iran so as not to split the Western allies as happened with Iraq.
Iran had threatened on Tuesday to attack Israel in response to any "evil" act by the US.
The tension between Iran and the West comes as a quarter of Nigeria's oil exports remain halted by violent disorders, along with Bolivia's move to nationalise its gas industry.