Oil prices retreated as profit taking set in on Thursday after crude hit a hit a nominal record above $96 a barrel in after-hours trading on Wednesday following a sharp drop in US inventories that left them at their lowest level in two years.

The US department of energy reported that crude oil inventories fell 3.9m to 312.7m in the week ending last Friday. That is the lowest level since October 2005, when the US oil industry was recovering from the impact of hurricanes Rita and Katrina.