Oil prices retreated from their highest level in 2.5 years on Friday as surging US production appeared to offset supply fears stoked by anti-government rallies in Tehran. American crude inventories slipped by 7.42 million barrels last week as refiners boosted operating rates to the highest level in more than a decade, signaling strong demand, the Energy Information Administration said on Thursday. US crude settled up 38 cents at $62.01, after earlier hitting $62.21, its highest since May 2015.
Brent for March settlement advanced 23 cents to end the session $68.07 a barrel on the London-based ICE Futures Europe exchange, the highest since December 2014.
It also said based on data through October, average USA imports of crude oil increased by more than 103,000 BPD from the 2016 level, to almost 8.0 MMBPD, the highest level since 2012.
Traders said political tensions in Iran, the third-largest producer in the Organization of the Petroleum Exporting Countries (OPEC), had pushed prices higher.
Ole Hansen, head of commodity strategy at Saxo Bank, said: "The market has moved into a bullish corner and the question is whether there is any way out of that apart from having a correction".
OPEC, supported by Russian Federation and other non-members, begun to hammer out a deal to cut supplies again in 2016, aiming to lift prices by removing a glut built up in the previous two years.
That has helped to tighten markets.
USA crude oil inventories continued to fall in the week to December 29, with a new decline of 7.4mn barrels (mbs) to reach 424.5 mbs, which is very close to the five year average of 420 mbs. At 424.5 million barrels, U.S. crude oil inventories are in the middle of the average range for this time of year. United States crude production continued to rise to reach 9.78mn barrels per day (mbpd) in the latest week (Reuters).
Julius Baer's Ruecker said that crude prices above $60 project an "overly rosy picture".
Pipeline outages in Libya and the North Sea have supported oil prices, although both disruptions are expected to be resolved by early January.
However, cold weather across much of the country was expected to keep demand high, as heating oil prices were just off highs not seen since early 2015.