Oil prices dipped on Wednesday after gaining more than a per cent in the previous session, but the trading was thin as several Asian countries started the Lunar New Year holidays which last for the rest of the week.

Analysts said that the drop was a reaction to soaring prices of the past two weeks, which many say was overblown.

Benchmark Brent crude futures were down 23 cents at $62.30 a barrel by 0226 GMT, while US WTI crude were 29 cents lower at $53.24 a barrel.

“Improvement in (US) WTI front month (crude oil) price may be premature, given the existing crude stock overhang,’’ BNP Paribas had said in a note late on Tuesday.

“US refinery outages, through seasonal maintenance and industrial action, will weaken US crude demand, exacerbating the crude stock excess in the near term,’’ it added.

US crude prices are now more than $9 a barrel cheaper than internationally traded Brent futures, their biggest discount since August last year.

The higher Brent price is largely a result of instability in West Asia, analysts said.

“Geopolitical developments are heating up in the MENA (Middle East, North Africa) region again,’’ JBC Energy said.

“In Libya, the sabotage of a key pipeline linking the Sarir field with the eastern port of Marsa al-Hariga resulted in the shut-in of Sarir, which had been producing around 185,000 b/d, leaving the country’s output at below 150,000,’’ it added.

Traders said Iraq was also having trouble keeping up its production rate.

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