Oil prices eased on Friday as traders took profits from a searing rally that pushed crude earlier in the week to its highest closing price in 13 years on concern over U.S. summer gasoline supplies. Benchmark U.S. light crude futures were down 19 cents at $37.74 per barrel at 1009 GMT, around 35 cents below Wednesday's settlement, which was the highest since just after Iraq invaded Kuwait in October 1990. London Brent was down 20 cents at $32.93 a barrel. Last week's Madrid bombings which killed 202 people, suspected to be the work of militant group al Qaeda, have sparked fears of attacks that could disrupt oil supplies and inflated a 'risk premium' in crude prices. After jumping more than four percent this week, prices eased on news that Pakistani troops may have trapped al Qaeda's top strategist and second-in-command Ayman al-Zawahri near the border with Afghanistan. "The premium will start peeling off. But I don't expect funds to liquidate their positions because of the news. They would only start selling off their positions massively if Osama bin Laden was captured," said a trader at Mitsui & Co in Tokyo.
U.S. light crude prices have averaged $35 a barrel so far in 2004, well above the 2003 average of $31, which was the highest in more than two decades. Soaring Chinese demand and low U.S. fuel inventories ahead of peak summer holiday driving consumption have helped fire the rally. The U.S. government's Energy Information Administration said on Wednesday gasoline stocks dropped 800,000 barrels last week to stand five percent below the five-year average. The Organisation of the Petroleum Exporting Countries, which controls half of world crude trade, plans to cut official output by four percent in April to 23.5 million barrels per day. OPEC President Purnomo Yusgiantoro said OPEC was worried about high prices but would not back track on the cut since crude had been allocated to customers for April. "Everyone's economy has been damaged by these oil prices," said William Ramsay, the deputy executive director of the International Energy Agency, which monitors world energy markets for 26 industrialised nations.///www.reutrers.com