The price of oil retreated below $105 a barrel Thursday, ending a surge that had pushed crude to a 16-month high.
The pullback followed a report from the International Energy Agency that said supplies would exceed an expected rise in demand next year.
U.S. benchmark crude fell $1.61 to close at $104.91. Brent crude, which is used to price imported crude used by many U.S. refineries, fell 78 cents to $107.73.
Oil has shot higher in recent days on a dramatic drop in supplies of oil and gasoline in the U.S. The decline suggests that demand may be rising. Crude rose as high as $107.45 early Thursday — the highest since March of last year — before falling back in later trading.
Analysts noted that even as prices were rising, global supplies remained ample and world demand, while growing, was moderate.
"The (U.S. crude) market has become overcooked," analyst Jim Ritterbusch, of Ritterbusch & Associates, wrote in a report Thursday.
Oil extended its recent rise Wednesday after the Energy Department said U.S. crude supplies fell by 9.9 million barrels in the week ended July 5. Gasoline supplies fell by 2.6 million barrels. In the past two weeks, oil supplies have dropped 20.2 million barrels, which is slightly more than one day's consumption for the U.S. Gasoline supplies have fallen 4.3 million barrels.
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