The surge in oil prices that has pushed up some grades by as much as $5 a barrel since the start of the year showed signs of running out of steam at the end of June.

Dated Brent was quoted around $16 a barrel in the final week of the month, modestly lower than a week earlier. This is about $4 a barrel higher than at the end of March.

Analysts say that the market is reacting to an inflow of European and west African crude oil into the US market. Some traders and analysts had been expecting a downward correction in prices because April-June is usually when oil demand is at its lowest.

A fall in refining margins has caused a slowdown of refinery output. This has also helped undermine crude oil demand, analysts say.

Asian oil demand hits Europe's refineries

European oil refiners are reducing the amount of crude they process by an estimated 10 per cent because of a shortage of Middle East crudes and reduced margins on prices.

Increasing amounts of Middle East crudes are going to fuel booming Asian economies, say analysts. Asia is estimated to consume about 25 per cent of world oil production compared with about 16-17 per cent 10 years ago, they say.

Much of the extra demand is met by Saudi Arabia, Dubai and Iran, and the discounts offered to European refiners have dropped. 'There is such a good Far East market that Middle East producers may be turning their back on us,' one analyst says. Several refineries are being adapted to using more North Sea and African grades.

European refiners have also been hit by the recent sharp rise in crude prices, which has outstripped wholesale and retail markets and left the refiners in the red. 'Refiners have to respond with lower throughputs. It makes no economic sense to keep running if you're losing,' according to an analyst.