Oil prices edged lower on Tuesday, as some of the geopolitical fears that took crude to a two-year high faded.
Light, sweet crude for December delivery fell 15 cents, or 0.3%, to $57.20 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, lost 58 cents, or 0.9%, to $63.69 a barrel.
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On Monday, oil prices jumped to heights not seen since 2015 after Saudi Arabian Crown Prince Mohammed bin Salman had more than five dozen princes, ministers and prominent businessmen detained in an effort to tackle alleged corruption in the kingdom.
Prices were also supported after Yemen's Houthi rebels fired a ballistic missile Saturday at the Saudi capital of Riyadh. The Saudis shot down the missile before it reached the city.
Following the rally, analysts cautioned that the surge in oil prices may be overdone.
"We've covered a lot of ground very quickly," said John Saucer, vice president of research and analysis at Mobius Risk Group. Oil "looks like it may have gotten a little bit ahead of itself."
Others believe that the geopolitical premium priced into the market will be short-lived, and won't have any discernible impact on Saudi Arabia's oil policy.
"As concerns about geopolitical tensions fade oil prices are likely to give back most of their recent gains," said Thomas Pugh, commodities economist at Capital Economics.
The Organization of the Petroleum Exporting Countries will hold its official meeting in Vienna on Nov. 30, at which some industry watchers speculate the group will extend a deal to limit production beyond March 2018.
OPEC and some major producers outside the cartel, including Russia, first agreed late last year to cap their production around 1.8 million barrels a day lower than peak October 2016 levels, with the aim of alleviating global oversupply and boosting prices.
Analysts have said the reemergence of a geopolitical risk premium in global oil markets is evidence that the market is rebalancing after a yearslong global glut.
Traders will also be watching for inventory data from the U.S. Energy Information Administration, due Wednesday at 10:30 a.m. ET, to see whether the amount of crude in storage has continued to decline.
Traders and analysts surveyed by The Wall Street Journal on average expect crude inventories to have fallen by 2.1 million barrels in the week ended Nov. 3.
The American Petroleum Institute, an industry group, said late Tuesday that its own data for the week showed a 1.6 million-barrel decrease in crude supplies, a 520,000-barrel increase in gasoline stocks and a 3.1 million-barrel decline in distillate inventories, according to a market participant.
Over the last 30 weeks, U.S. crude oil inventories have fallen at the fastest rate on record according to EIA data going back to 1982, Morgan Stanley analysts wrote Monday.
Gasoline futures declined 0.8% to $1.8153 a gallon and diesel futures fell 1% to $1.9219 a gallon.
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(END) Dow Jones Newswires
November 07, 2017 17:05 ET (22:05 GMT)