Oil prices ended lower on Monday after a late wave of profit-taking sales wiped out a gasoline-led rally triggered by a blaze at Norway's biggest oil refinery which halted the plant's gasoline exports and strengthened concerns over transatlantic supply.
US light crude spent most of the day higher, rising as high as $40.75 a barrel at one point, its highest since June 3. It settled 46 cents a barrel lower at $39.50. London Brent ended 42 cents a barrel down at $36.63.
Trade was dominated by volatile movement in US gasoline futures, which swung from a gain on 4.35 cents a gallon, or over 3 percent higher, to close lower after a sharp pull-back in late trade to $1.3002, a loss of 2.13 cents.
The early rally was attributed to news of a refinery fire in Norway which halted gasoline exports and a steeper crack spread - the differential between the yield of a typical oil product and that of crude oil - which makes it more profitable to produce gasoline.
The pre-close sell-off in gasoline, and, as a result, in the overall market, was attributed to profit taking by fund managers, who traders said appeared to be rotating their investments out of energy futures into the stock market.
Crude prices have risen more than $4 in the past two weeks, as legal turmoil at Russian oil giant YUKOS, an oil workers' strike in Nigeria and sabotage attacks in Iraq reminded dealers of possible interruptions to crude flows.
Today's fresh gains followed a fire at Norwegian energy group Statoil 's Mongstad plant which injured two people and forced the closure of a crude oil unit, halving production capacity to 90,000 barrels per day.
The refinery - one of the north-west Europe's main gasoline exporting plants - halted its shipments, driving up prices on both sides of the Atlantic.
Strong world demand growth has left little spare global capacity to cope with any supply problems.
"Every time you get a refinery fire or a pipeline outage, you're going to get a reaction like this," said Tom Bentz of BNP Paribas bank.
Reassurance from top Opec exporter Saudi Arabia that the cartel intends to press on with a planned 500,000 barrels per day (bpd) increase in formal quotas at its July 21 meeting has failed to bring prices down.
Opec is already producing well above official limits in an effort to stop prices rising too high.
A Gulf source familiar with Saudi oil policy said on Monday that the kingdom would keep pumping 9.1 million barrels a day in August, the third month in a row at such high production rates.
Saudi Arabia has produced well in excess of its official Opec output quota since June and on Monday informed customers of export volumes for August. Buyers in Asia and European refiners said sales were unchanged from July's high levels.
Higher Opec supplies helped bring prices down from 21-year highs above $42, but analysts said that physical oil markets were still tight.
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