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Reuters: Oil Continues To Fall

EXTRACTS: Oil is up 20 percent this year on real and feared supply disruptions. OPEC member Iran’s row with the West over its nuclear work has kept dealers on edge over a wider outage from the Middle East, while Nigerian militants have cut about a quarter of supplies from the world’s eighth largest exporter.

Two oil worker hostages in Nigeria were released on Monday after a week in captivity, but another four were kidnapped late Sunday, part of a string of abductions. Royal Dutch Shell last week restored 180,000 bpd of Bonny Light crude production after a pipeline leak, but more than 400,000 bpd remained offline.

THE ARTICLE

15/08/2006 04:40 PM
Neil Chatterjee

Oil prices slipped towards US$73 a barrel on Tuesday as a fragile truce held between Israel and Lebanon, while oil kept flowing from North America’s largest field after expectations of a full shutdown for repairs.

US light sweet crude eased 28 cents to US$73.25 a barrel by 0224 GMT, adding to an 82-cent slide on Monday. London Brent traded 10 cents down at US$74.20 a barrel.

Oil fell as a truce to end fighting between Israel and Hizbollah entered its second day on Tuesday, tempering concern about supply from a region that pumps a third of the world’s oil.

“The market appears to have gained a degree of comfort…for the current situation in the Middle East to impinge on oil flows,” said Barclays Capital. “There is still the risk of further upside should perceptions change again.”

Planning got underway for a beefed up United Nations peacekeeping force, after ground clashes and air strikes ceased on Monday. Traders feared a prolonged war could draw in regional oil producers Syria or Iran, both supporters of Hizbollah.

Brent has dropped from a record high of $78.65 hit last week, also pressured by an alleged trans-Atlantic aircraft bomb plot that raised fears of a cut in air travel.

Prices slipped further after BP said it would keep half its Prudhoe Bay oilfield pumping in Alaska, the largest in North America, while it carries out pipeline repairs, instead of shutting down the entire field.

As of Saturday it was pumping about 150,000 barrels per day (bpd) from Prudhoe Bay and expected to ramp up output to 200,000 bpd – half of full capacity – after it completes maintenance.

But analysts said this and other supply disruptions amid falling stocks in the United States provided fundamental support.

The other half of Prudhoe Bay is expected to be offline for months, possibly until early next year. BP said Monday it does not yet have a timetable for restarting the eastern half.

“The spectre of Los Angeles running out of gasoline is a nightmare,” said Deborah White at SG Commodities, pointing to U.S. West Coast refiners using Alaskan crude to make the fuel and calling for a release of crude from U.S. strategic reserves.

Falling Stocks

Oil is up 20 percent this year on real and feared supply disruptions. OPEC member Iran’s row with the West over its nuclear work has kept dealers on edge over a wider outage from the Middle East, while Nigerian militants have cut about a quarter of supplies from the world’s eighth largest exporter.

Two oil worker hostages in Nigeria were released on Monday after a week in captivity, but another four were kidnapped late Sunday, part of a string of abductions. Royal Dutch Shell last week restored 180,000 bpd of Bonny Light crude production after a pipeline leak, but more than 400,000 bpd remained offline.

Traders will be looking to US inventory data due on Wednesday for the next sign on fundamentals in the world’s top oil consumer, with analysts expecting a 1.3 million barrel fall in crude stocks last week as refineries stepped up output.

“With stocks not that fat, and oil demand growing, supply risks and supply setbacks take on renewed urgency in oil markets,” said economist Jan Stuart at UBS.

A Reuters poll also showed gasoline stocks were expected to slide 1.9 million barrels as demand remained strong despite record pump prices, which an industry survey showed hit an all-time high near $3.03 a gallon last week.

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