London (Platts)--7Jan2010/743 am EST/1243 GMT

Crude futures drifted lower during European morning trading while continuing to retrace Wednesday's unexpected surge in buying which followed the release of the bearish US Energy Information Administration's weekly stock report.

"Technically, a break of the $82/b resistance was necessary to attract further algorithmic flows and it was not a DOE report that would stand in the way," Oilivier Jakob said of Wednesday's rise in the WTI crude contract.

At 12:20 GMT February WTI traded 68 cents lower at $82.50/barrel, while the February ICE Brent contract was down 67 cents at $81.22/b as the market slipped below Wednesday's high of $82.21/b.

The market has been viewed as very overbought following steady price rises since mid-December as funds and speculators have increased their long positions in commodities, while fundamentals have not provided any "sign that the supply system is under any threat."

"We are...at the start of the year, in the middle of a technical rally and the way WTI was massaged in front of $82/b clearly shows that the current flows are not necessarily those of fundamental traders," said Jakob.

--Elzbieta Rabalska, elzbieta_rabalska@platts.com