LONDON, May 29: Oil prices fell sharply in volatile trade on Thursday after getting an initial boost on news of plunging energy stockpiles in key consumer the United States.

New York’s main oil futures contract, light sweet crude for July delivery, shed $2.30 to $128.73 per barrel, after spiking above $133 on publication of the latest US stockpiles report.

Brent North Sea crude for July tumbled $3.83 to $127.10.

Both contracts had hit historic peaks a week ago, with Brent at $135.14 and New York $135.09 on fears over tight supplies, before sliding as many traders cashed in their gains.

The US Department of Energy (DoE) said on Thursday that American crude reserves slumped 8.8 million barrels in the week ending May 23.

Gasoline or petrol stockpiles tumbled 3.2 million barrels. Market expectations had been for no change.

“The first reaction was bullish, then we saw demand is down ... so we wondered where is all the crude going,” said Sucden analyst Robert Montefusco.

The DoE report was published one day later than usual due to a public holiday in the United States on Monday.

MF Global trader Robert Laughlin said that despite prices falling on Thursday, “concerns still exist that global demand outstrips supply.”

“Whilst high prices have caused worldwide condemnation, the ‘man in the street’ is now accepting that expensive fuel is here to stay,” he added.

British Prime Minister Gordon Brown on Wednesday warned that the world was facing a “great oil shock” that required a comprehensive international strategy to address.

The Organisation of the Petroleum Exporting Countries (Opec), which pumps 40 per cent of the world’s oil, is reluctant to bend to US-led demands for it to pump more crude to help cool prices.

Oil prices breached $130 a barrel for the first time eight days ago when the US government reported unexpected declines in crude and gasoline stockpiles.

The price of oil on international markets has risen by about a third since the start of 2008 and compares with just $50 just 18 months ago.

Analysts said increased speculative trading in the oil markets had been driven by tight global supplies and a weaker dollar, which makes commodities priced in the US currency cheaper for buyers armed with stronger currencies.

Surging oil prices have also been underpinned by growing demand in China and other emerging economies, as well as unrest in crude-producing countries, particularly Nigeria, and Opec’s reluctance to hike output, analysts added.—AFP