Oil prices steadied above $74 a barrel on Friday, after a slump from last week's record as there were no signs Middle East violence would affect oil exports and higher US stock levels provided a better supply buffer.
US light crude for September shed 17 cents to $74.10 a barrel by 0355 GMT. The previous front-month August contract gained 42 cents on Thursday, when gasoline prices carried the complex higher on news of unplanned outages at two US refineries.
London Brent crude traded down 22 cents to $73.50.
Prices dipped as the US Secretary of State Condoleezza Rice plans to go to the Middle East as early as next week to press for a political solution to the fighting between Israel and Hizbollah guerillas in Lebanon.
The US stresses the need for a "durable" solution to the increasingly bloody 10-day war before any cease-fire can be implemented, unlike the United Nations and key European allies that want a cease-fire as soon as possible.
"The real concern is we could see other (Middle East) countries dragged into the situation and that's the big worry. If the negotiations ends favourably, that will be a bearish factor on crude," said Gerard Burg, energy economist at the National Australia Bank.
A surprise build in US gasoline by 1.5 million barrels and crude stocks by 200,000 barrels last week also undermined prices.
But losses were capped in view of strong demand in the US, where government data showed that four-week average US gasoline demand, which accounts for more than a tenth of the world's total consumption of oil, rose 1.9 per cent from a year ago.
A slew of refinery outages in the US, taking place during the peak Atlantic hurricane season, also supported prices.
ConocoPhillips has shut its 306,000 barrel-per-day (bpd) Wood River refinery in Illinois after a power cut. Valero Energy Corp. shut a gasoline-making unit on Thursday at a Louisiana refinery for 20 days for unplanned repairs.
"If there's any disruption to refineries, this will be a major concern," added Burg, referring to the hurricane season.
Last year's devastating hurricanes Katrina and Rita crippled US oil and gas infrastructure along the Gulf of Mexico, causing prices to soar to then-record highs.
Also keeping markets on tenterhooks is Iran's nuclear dispute with the West. European nations distributed a draft United Nations resolution on Thursday that threatens to consider sanctions if Tehran fails to suspend uranium enrichment.
In OPEC exporter Nigeria, where production has been cut by militant attacks, US oil major Chevron said it has recovered 50 to 60 per cent of 140,000 bpd output lost to ethnic fighting in the Niger Delta in southern Nigeria in 2003.
US light crude for September shed 17 cents to $74.10 a barrel by 0355 GMT. The previous front-month August contract gained 42 cents on Thursday, when gasoline prices carried the complex higher on news of unplanned outages at two US refineries.
London Brent crude traded down 22 cents to $73.50.
Prices dipped as the US Secretary of State Condoleezza Rice plans to go to the Middle East as early as next week to press for a political solution to the fighting between Israel and Hizbollah guerillas in Lebanon.
The US stresses the need for a "durable" solution to the increasingly bloody 10-day war before any cease-fire can be implemented, unlike the United Nations and key European allies that want a cease-fire as soon as possible.
"The real concern is we could see other (Middle East) countries dragged into the situation and that's the big worry. If the negotiations ends favourably, that will be a bearish factor on crude," said Gerard Burg, energy economist at the National Australia Bank.
A surprise build in US gasoline by 1.5 million barrels and crude stocks by 200,000 barrels last week also undermined prices.
But losses were capped in view of strong demand in the US, where government data showed that four-week average US gasoline demand, which accounts for more than a tenth of the world's total consumption of oil, rose 1.9 per cent from a year ago.
A slew of refinery outages in the US, taking place during the peak Atlantic hurricane season, also supported prices.
ConocoPhillips has shut its 306,000 barrel-per-day (bpd) Wood River refinery in Illinois after a power cut. Valero Energy Corp. shut a gasoline-making unit on Thursday at a Louisiana refinery for 20 days for unplanned repairs.
"If there's any disruption to refineries, this will be a major concern," added Burg, referring to the hurricane season.
Last year's devastating hurricanes Katrina and Rita crippled US oil and gas infrastructure along the Gulf of Mexico, causing prices to soar to then-record highs.
Also keeping markets on tenterhooks is Iran's nuclear dispute with the West. European nations distributed a draft United Nations resolution on Thursday that threatens to consider sanctions if Tehran fails to suspend uranium enrichment.
In OPEC exporter Nigeria, where production has been cut by militant attacks, US oil major Chevron said it has recovered 50 to 60 per cent of 140,000 bpd output lost to ethnic fighting in the Niger Delta in southern Nigeria in 2003.
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