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WASHINGTON -- Oil prices made a sharp retreat Wednesday as concerns about an immediate loss of supply from Russia subsided and gas supplies in the United States increased, reported the Associated Press.
Still, traders said geopolitical instability and strong demand would keep global crude markets tense.
Light crude for September delivery fell $1.32 to $42.83 on the New York Mercantile Exchange, while Brent crude futures dipped 94 cents to $39.70 on London's International Petroleum Exchange.
Russian oil giant YUKOS said Wednesday that the government will allow it to use its bank accounts to "continue financing production activities" -- a move that could help the beleaguered company stay afloat for now, despite the $3.5 billion in back taxes it owes.
"This is really good news and it comes at a time when the market needed really good news," said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.
YUKOS pumps some 1.7 million barrels per day of oil, or roughly 2 percent of total production.
Flynn said the other news that helped push oil prices lower was that "we saw gasoline supplies rise substantially."
In its weekly report, the Energy Department said the supply of commercially available gasoline rose by 2.4 million barrels last week, reaching a historically comfortable level for this time of year. Motor fuel supplies are now 4 percent higher than last year at 210.1 million barrels.
"Concerns of immediate (gasoline) supply shortages have been calmed," Flynn said. However, he added that a disruption in crude output from any number of petroleum-producing countries remains a possibility and that would send oil prices right back up.
Oil prices have risen in recent weeks due to the uncertainty surrounding YUKOS, as well as concerns about the reliability of crude supplies from Iraq, where saboteurs have attacked pipelines and disrupted exports, and fears of terrorist attacks in the United States. U.S. authorities warned Sunday that al-Qaida was planning attacks on five key financial institutions in New York, New Jersey and Washington.