( Reuters ) - Oil prices fell from peaks above $103 a barrel on Friday as Turkey's withdrawal of troops from northern Iraq eased geopolitical tensions, clipping a fund-driven rally to new inflation-adjusted highs.
U.S. crude settled down 75 cents at $101.84 a barrel after hitting a record $103.05 earlier in the session. London Brent crude settled 80 cents lower to $100.10 a barrel, off at all-time high of $101.27.
A crush of cash from investors seeking a hedge against inflation lifted several commodities to new highs this week, with oil eclipsing the inflation-adjusted high of $102.53 reached in 1980 after the Iranian revolution.
Further support came from supply disruptions, including export delays in Ecuador and a fire at a European natural gas terminal, before news of the Turkish withdrawal encouraged traders to take profits.
Turkey said on Friday its troops had returned to bases after an offensive against Kurdish rebels in northern Iraq.
"One of the legs of this three-legged bull stool, geopolitical, may have cooled off a bit by Turkey announcing that it's withdrawing from its incursion into Iraq," said Nauman Barakat of Macquarie Futures USA.
"The other two legs of this stool - the weak U.S. dollar and new investors' flows - remain red-hot."
Analysts said the plunging dollar, which hit an all-time low on Friday against the euro has encouraged investors to pour money into commodities to hedge against inflation.
Markets also have rallied behind expectations the Organization of the Petroleum Exporting Countries will not raise output when it meets on March 5, rebuffing a call from the United States for more supply.
"We in Iraq think that keeping the production the same as it is and monitoring the markets is the best decision," Iraqi Oil Minister Hussain al-Shahristani told Reuters.
"In general, all signs say that there is not a shortage in the international crude oil market and, therefore, to ask OPEC to increase production because of the prices now is not justified."
OPEC member Ecuador delayed crude exports and declared force majeure after a landslide punctured the Trans-Ecuadorean pipeline.
Petroecuador said it had enough oil storage capacity to maintain normal production for three days while it repairs the pipeline, which was carrying around 150,000 barrels per day of oil from the Amazon forest to ports on the Pacific Ocean.
Oil surged on Thursday after a fire at Royal Dutch Shell's Bacton gas terminal in Norfolk, England, shut more than 45 million cubic meters per day of gas supplies, about 13 percent of the UK national grid's forecast demand.
The Shell-operated pipeline resumed flowing gas into the UK network at Bacton around midday on Friday, data from National Grid showed.