Oil falls below $65 in Asian trade

I / Singapore May 29, 2009, 10:40 IST

Oil prices fell in Asian trade today after touching new six-month highs overnight on an unexpected big drop in US crude reserves, analysts said.

New York's main contract, light sweet crude for July delivery, dropped 36 cents to $64.72 a barrel.

Brent North Sea crude for July delivery was off 39 cents to $64 a barrel.

During US trading yesterday, New York crude jumped as high as $65.35 before easing to close at $65.08, its highest finish since November 4.

Crude prices have surged in recent days on growing optimism energy demand would pick up on hopes that the US economy is on the mend, analysts said.

"In the most general terms, the oil market still seems to be optimistically embracing the idea that the worst of the recession has passed," said Mike Fitzpatrick of MF Global.

OPEC's decision yesterday to maintain its production level at 24.84 million barrels a day despite a glut of crude also signals the cartel's optimism that demand would pick up soon, analysts said.

"There is widespread belief within the organisation that the worst of the economic downturn has passed, and that a gradual recovery is beginning," said analyst David Kirsch from consultancy PFC Energy.