Traders said the price fall was due to some profit taking ahead of the expiry of the February contract later on Thursday, but overall the market remained firm. The contract had settled in New York at $29.54, up 69 cents from the previous day. Prices earlier rose as high as $29.68, the highest since the Gulf War in 1991, on forecasts that the US will be in the grip of a cold snap for another 10-12 days.

The bullish weather outlook combined with firm signals from key members of the Organisation of Petroleum Exporting Countries (Opec) last week that output cuts will, likely, be extended, has bolstered the sentiment. Opec's compliance committee, which includes oil ministers from Kuwait, Iran and Venezuela, said after a meeting on Friday they strongly recommended the group keep the supply curbs beyond the March expiry.

The production cuts - aimed at cutting some five million barrels per day from worldwide production - and Opec's tight adherence to it has resulted in a surge in crude prices. On Wednesday, Brent crude futures on the London International Petroleum Exchange (IPE) also touched a nine-year high of $26.30, before ending the day at $25.84. Almost a year ago, IPE Brent was under $10 a barrel.

The US Senators warned on Wednesday that crude prices were too high and that the Clinton administration needed to sell oil from the US strategic Petroleum Reserve to push down prices. "We are getting close to the danger line," said Senator Charles Schumer, a New York Democrat, referring to the nine-year peak.

The US energy secretary Bill Richardson also said he was "concerned" about rising crude oil prices, and would discuss the issue when he meets with oil ministers from Saudi Arabia, Venezuela and Kuwait at the World Economic Forum later this month.