By early afternoon in Europe, benchmark oil was down 28 cents to $84.17 a barrel in electronic trading on the New York Mercantile Exchange. The contract surged $4.21 to finish at $84.45 per barrel in New York on Tuesday.
In London, Brent crude for November delivery was down 7 cents at $107.07 on the ICE Futures exchange.
Oil’s rally on Tuesday mirrored gains in global stock markets, buoyed by hopes that Europe was preparing a plan to contain the region’s debt crisis that would prevent another recession.
“If the markets get a sense that things are dragging, the decline could easily resume, but this may not happen this week, as the politicians will be afforded some additional time,” said commodity analyst Edward Meir at MF Global in New York. “However, if no progress is made going into next week, the markets could start getting edgy, and this week’s euphoria could easily fade.”
Some analysts foresee bleak prospects.
JP Morgan projected the economies of the 17 countries using the euro common currency will shrink by up to 1 percent in the next nine months before resuming growth in the second half of 2012. This could hurt oil demand, it said.
Energy investment consultants Ritterbusch and Associates said oil prices are likely to head south in the near term as a longer-term solution to Europe’s debt crisis remained elusive.
It said the focus has shifted to key economic releases in the US due later this week that will give clues on the future strength of demand for fuel, including gross domestic product, crude stockpiles and personal income.
The American Petroleum Institute late Tuesday said crude stocks rose 568,000 barrels for the week ended Sept. 23, lower than market forecasts. However, Ritterbusch said it expected stockpiles data from the Energy Department’s Energy Information Administration — the market benchmark — due later Wednesday to show weak demand.
Crude oil has fallen about 15 percent since July and is down 26 percent since hitting a high for the year of $113.93 per barrel on April 29.
In other Nymex contracts for November, heating oil rose 0.43 cent to $2.89 per gallon, gasoline futures shed 0.49 cent to $2.6311 per gallon and natural gas gained 0.05 cent to $3.88 per 1,000 cubic feet.
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