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New York Times: Oil Sideways Below $74: Royal Dutch Shell on Wednesday declared force majeure…

By REUTERS
Published: July 27, 2006
Filed at 0:33 a.m. ET

SINGAPORE (Reuters) – Oil prices drifted sideways below $74 a barrel on Thursday, supported by an unexpectedly deep draw in U.S. gasoline stocks that affirmed the vigor of fuel demand and diplomats’ failure to halt fighting in the Middle East.

A new set of supply outages in OPEC member Nigeria added to the upward pressure, although prices remain 6 percent below the record $78.40 a barrel hit two weeks ago.

U.S. light, sweet crude eased 8 cents to $73.86 a barrel by 0244 GMT, reversing part of Wednesday’s 19-cent gain. London Brent was down 18 cents at $73.82 a barrel, near parity to U.S. crude after trading about $1 below it a week ago.

Prices gained on Wednesday after U.S. government data showed a 3.2 million barrel drop in gasoline inventories, far deeper than the 200,000 barrel draw expected by analysts, as robust demand and refinery problems sapped stockpiles.

U.S. gasoline demand, which accounts for more than a tenth of the world’s oil consumption, is up 1.8 percent from last year over the past four weeks, as $3 a gallon pump prices fail to deter summer holidaymakers from taking to the roads.

“There have been a lot of expectations that demand would be tapering off with high prices, but we really haven’t seen that coming through,” said Gerard Burg, minerals and energy economist at the National Australia Bank.

U.S. crude oil inventories were unchanged from the previous week, maintaining a healthy surplus versus a year ago, while distillate inventories rose 800,000 barrels, less than expected.

In Nigeria, which has yet to restore nearly a quarter of its production lost in February due to militant attacks, fresh violence at a flow station operated by Italy’s ENI and a pipeline leak cut deeper into output.

Royal Dutch Shell on Wednesday declared force majeure on loadings of its Bonny Light crude as a result of the leak, which took an additional 180,000 bpd of output offline.

Intensified violence between Israel and Hizbollah kept the market on edge, although after 16 days of fighting there is little sign of the war affecting supplies from regional oil producers, who pump a third of the world’s crude.

Foreign ministers meeting in Rome on Wednesday pledged to work for a lasting ceasefire but did not call for the fighting to stop, as Lebanon and its Arab allies had demanded.

Discussion now shifts to an ASEAN forum in Kuala Lumpur, where U.S. Secretary of State Condoleezza Rice, EU foreign policy chief Javier Solana and Russian Foreign Minister Sergei Lavrov will discuss the crisis with Asian counterparts.

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