Oil prices pulled back on Thursday, as geopolitical concerns eased and some investors cashed in on the week's price rise.
Light, sweet crude for November delivery fell 75 cents, or 1.4%, to $51.29 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, dropped 92 cents, or 1.6%, to $57.23 a barrel.
Prices rose to a three-week high on Wednesday, boosted by rising political tensions in the Middle East. Clashes between Iraqi government forces and troops from the northern, semiautonomous Kurdish region have led to temporary shutdowns in crude production from the oil-rich Kirkuk province.
However, the rally ran into resistance as traders stepped back and awaited more information on the extent of the disruption.
"The market's tired. It's had a big rally," said Donald Morton, senior vice president at Herbert J. Sims & Co., who oversees an energy trading desk. "I think you've got to look for escalation or if it slowly moves into the background."
Investors have remained skeptical of oil's ability to break above $52 a barrel, especially as U.S. shale producers have used rallies as opportunities to hedge and lock in prices for future production.
Harry Tchilinguirian, global head of commodity markets strategy at BNP Paribas, said every time crude prices rally opportunities arise for traders to take profits and for U.S. shale producers to put on hedges.
"I don't think there is any particular trigger," said Mr. Tchilinguirian. "This move is more symptomatic of something we have been seeing over the past week -- the market is having trouble moving higher."
According to some analysts, the fact that oil prices didn't react more to the conflict in Iraq is a sign that bullish sentiment has reached its peak.
"There is no lack of wild cards on the oil market but the uncertainties seem more than anticipated in the exceptionally bullish market mood," said Norburt Rucker, head of macro and commodity research at Julius Baer.
In a Thursday note, Mr. Rucker said he sees oil prices retreating back to the $45 to $50 a barrel range, as funds sell off excessive long positions.
This week energy traders have grappled with increased uncertainty in oil supply and demand, including concerns the U.S. could impose fresh sanctions on Iran, limiting its oil export capacity. President Donald Trump last week refused to certify Iran's compliance with a 2015 international agreement to curb the Islamic Republic's nuclear program in exchange for economic sanctions relief.
At the same time, there were fresh signs this week that OPEC could extend its production cutting deal through to the end of next year. Algeria on Wednesday became the latest member of the Organization of the Petroleum Exporting Countries to back an extension of output cuts.
"I think it is desirable and probable to conduct an extension," Abdelmoumen Ould Kaddour, chief executive of Algeria's state oil company, told The Wall Street Journal from the sidelines of the Oil and Money conference in London.
OPEC and 10 producers outside the cartel, including Russia, first agreed late last year to cap their production at around 1.8 million barrels a day lower than peak October 2016 levels, with the aim of alleviating global oversupply and boosting prices. In May, the deal was extended through March 2018. OPEC is set to officially debate an extension at its next meeting in Vienna in November.
Gasoline futures rose 0.1% to $1.6447 a gallon and diesel futures declined 1.5% to $1.7767 a gallon.
--Benoit Faucon contributed to this article.
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(END) Dow Jones Newswires
October 19, 2017 16:23 ET (20:23 GMT)