Oil prices dipped on Wednesday after gaining more than a percent in the previous session, but trading was thin as several Asian countries started the Lunar New Year holidays which last for the rest of the week.
Analysts said that the drop was a reaction to soaring prices over the past two weeks, which many say was overblown.
Benchmark Brent crude futures were down 29 cents at $62.24 a barrel by 0520 GMT, while U.S. WTI crude was at $53.24 a barrel, also down 29 cents.
ANZ bank said on Wednesday that U.S. crude inventories were at a 417.9 million barrels and that it expected “inventories to increase further in the near term as U.S. refinery outages weaken US crude demand.”
U.S. crude prices are now $9 a barrel cheaper than internationally traded Brent futures, their biggest discount since August last year.
The higher Brent price is largely a result of instability in the Middle East, analysts said.
“Geopolitical developments are heating up in the MENA (Middle East, North Africa) region again,” JBC Energy said.
“In Libya, the sabotage of a key pipeline linking the Sarir field with the eastern port of Marsa al-Hariga resulted in the shut-in of Sarir, which had been producing around 185,000 b/d, leaving the country’s output at below 150,000,” it added.
Traders said Iraq was also having trouble keeping up its production rate.