Oil prices pull back after robust rally

Oil prices retreated Thursday after a powerful rally Wednesday fueled by falling US crude supplies and the Federal Reserve's decision to keep its easy-money flowing. New York's main contract, West Texas Intermediate (WTI) for October delivery, sank $1.68 to finish at $106.39 a barrel. The European benchmark, Brent North Sea crude for delivery in November, slid $1.84 to settle at $108.76 a barrel in London trade. Oil prices for both contracts had gained about $2.50 Wednesday after the US Department of Energy reported a larger-than-expected decline in US crude stockpiles last week, spurring hopes for improved demand in the world's largest economy. Prices also gained a further boost after the Fed unexpectedly announced it would keep buying $85 billion in assets a month. The WTI contract began the session sharply higher, "in an attempt to continue its rebound after the Fed announcement it will keep it stimulus program unchanged," said Gene McGillian of Tradition Energy. "But the rebound seemed to dry up during the day with people taking profits," he said. The markets also reacted to signs of easing tensions in areas of the oil-rich Middle East. Iran's new President Hassan Rowhani has described Israel as an "occupier" that has brought instability to the Middle East but said the Islamic republic did not seek war with any country. "The market has set a premium attached to the situation for Iran for quite some time. The statement from the Iranian president seems to get a little of it out of the market," said McGillian.