LONDON (AFP) - World oil prices fell further from record peaks, showing losses of six percent in two days as speculators rushed to bank profits following a surge in crude oil stockpiles.
New York's main contract, light sweet crude for delivery in December, dropped 76 cents to 51.70 dollars a barrel in electronic deals.
In London the price of Brent North Sea crude oil for delivery in December lost 84 cents to 48.61 dollars a barrel in opening deals.
World crude oil prices began plummeting Wednesday following news of a weekly surge in US crude oil stockpiles that calmed market fears of a supply crunch during the northern hemisphere winter.
"With crude stocks having built up last week, it means that US refiners are in a good position to cope with the winter demand on heating oil," Deutsche Bank analyst Adam Sieminski said.
Brent had initially reached a new all-time peak of 51.94 dollars after the US Energy Department said heating oil inventories, in high demand in the northern hemisphere winter, slipped 600,000 barrels to 48.9 million last week.
But world oil futures then tumbled as traders chose to focus instead on an increase in crude oil stocks of 4.0 million barrels to 283.4 million barrels in the week to October 22.
New York's benchmark contract plunged 2.71 dollars, or 4.9 percent, to close at 52.46 dollars a barrel Wednesday, a three-week low.
But some analysts were taken aback by the market's reaction and said prices were now ripe for a rebound.
"The data which appear to have been the trigger for the fall don't really justify the market's response in our view," said Barclays Capital analyst Kevin Norrish.
"If anything it showed a tighter picture for distillate and heating oil. The build in crude is not surprising given the fact that US refineries are still operating at a lower rate that they normally would be at this time of year, partly because of maintenance and partly because of the still lingering effect from the hurricane."
"The problems in the US Gulf of Mexico suggest that we are going to get very low production for quite a long time until 2005," he said.
World oil prices have surged by about two-thirds since the start of this year, driven by strong demand, notably from China, as well as global supply strains and fears of disruption in major producers such as Russia and Nigeria.
Adjusted for inflation, however, prices remain well below the levels reached in the wake of the 1979 Iranian revolution when prices surged beyond the equivalent of 80 dollars a barrel in today's money.
In Nigeria, a coalition of trade unions and pro-democracy groups issued President Olusegun Obasanjo with an ultimatum Tuesday, warning him to cut fuel prices this week or face a renewed nationwide general strike.
Nevertheless, Daniel Hynes, an energy strategist with ANZ Bank in Melbourne, believes the market "may be at the start of a downward trend which will head towards a price based more on fundamentals than what has been in the past."
Hynes said he sees 50 dollars a barrel as a key support level for US crude.
"If it falls below 50 dollars in the next week or two, we could see some further falls. But we've seen in the past that there's plenty of support at that level, so 50 dollars is a critical test."
However, Barclays Capital's Norrish predicted markets would snap back.
"I expect prices to come back strongly and probably exceed the levels to which they've already risen. We still expect to see fresh highs," he said.
10/28/2004 - 11:55 GMT - AFP