Oil fell $2 to below $75 a barrel today after Britain said it had thwarted a plot to blow up aircraft in trans-Atlantic flight.
Early this evening US oil was down $1.95 at $74.40 and London Brent crude was down $1.72 at $75.56.
UK police said this morning that a foiled plot to blow up aircraft flying from Britain to the US was 'an attempt to commit mass murder on an unimaginable scale'.
Crude futures had begun falling during Asian trading hours on hopes that British oil major BP would avoid a complete shutdown of its Alaska operations. Also, Royal Dutch Shell said it had repaired a pipeline in Nigeria shut since last month, which helped prices head downwards.
Prices had shot up earlier this week, with Brent striking a record high $78.64, after BP said it had started shutting down its oil field in Prudhoe Bay as it repairs a pipeline leak caused by corrosion.
A complete shutdown would halt production totalling 400,000 barrels of oil per day, or 8% of daily US output. But BP America chairman Bob Malone said yesterday that BP would try to keep at least 200,000 barrels per day of oil gushing.
Engineers would make a decision between Friday and Monday on this, he said.
Analysts believe it will be many months before full output is resumed, although US Energy Secretary Samuel Bodman said on Tuesday that he had been assured by BP managers that a full shutdown may not be necessary.
Losses to oil prices were limited, however, owing to continued strong energy demand in the US and violence in the Middle East.
A steeper-than-expected fall in US crude and petrol inventories was also supporting prices. The US Department of Energy said in a weekly update yesterday that petrol stocks fell by 3.2 million barrels to 207.7 million in the week to August 4.
That was more than three times the market's expected drop of a million barrels. It was also the biggest fall in US petrol inventories since mid-April, reflecting robust demand as many North Americans take to the roads for summer holidays.
However, petrol stocks still remain 0.8% higher than at the same stage of 2005, the DoE said.