Crude oil futures dropped today on reports, later denied, that Britain and the US had agreed to release strategic crude reserves in a bid to cool high prices.
Prices in London had dived by as much as $4 in reaction to the reports but later trimmed losses as a government source strongly denied that an agreement had been struck between London and Washington to boost market supplies.
In late London deals, Brent North Sea crude for delivery in April was down $1.27 to $123.70 a barrel. New York's main contract, light sweet crude for April lost 33 cents to $105.10 a barrel.
Oil prices had been steady earlier today as investors weighed concerns over Middle East supplies and a surge in American crude stockpiles, analysts said.
Tensions between crude producer Iran and the West remain a key concern for traders. Iran yesterday condemned what it said was the use of oil as a political tool against producers, referring to Western sanctions over its controversial nuclear programme. Tehran has repeatedly said its nuclear activities are exclusively peaceful.
The International Energy Agency (IEA) yesterday forecast that Iranian oil exports would fall by 800,000 barrels a day after mid-2012. The IEA said Iran's exports would decline to around one million barrels, while global demand for oil grows by 800,000 barrels to 89.9 million barrels.
The US and the European Union have in the past four months ramped up economic sanctions on Iran in a bid to force it to suspend uranium enrichment, the most sensitive part of its nuclear programme. Iran had warned in December that it would blockade the strategic Strait of Hormuz - a key transit route for global oil supply - if the West imposes further punitive measures.
