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New York Times: Oil Drops Below $61 on Healthier US Supply Picture

EXTRACT: A fresh episode of militant attacks in Nigeria, which killed five soldiers, has also reminded dealers of potential supply cuts in Africa’s top oil producing country. Royal Dutch Shell (RDSa.L) already has 495,000 barrels of oil equivalents per day shut down at fields it operates in Nigeria, mostly because of militant attacks.

THE ARTICLE
 
By REUTERS
Published: October 3, 2006
Filed at 2:21 a.m. ET

SINGAPORE (Reuters) – Oil fell below $61 a barrel on Tuesday, extending a 3 percent drop in the previous session, as forecasts for a further build in fuel stocks in the United States offset slight cuts in OPEC output.

U.S. crude (CLc1) lost 17 cents to $60.86 a barrel by 0617 GMT, after plunging by $1.88 on Monday. London Brentfell 22 cents to $60.23.

Prices were pressured after oil major BP Plc (BP.L) said on Monday it had restarted the 30,000 barrels per dayLisburne satellite oilfield in Alaska over the weekend after correcting a gas leak, adding to bearish sentiment over high U.S. inventories.

Analysts polled by Reuters predicted distillate fuel stocks to have risen another 1.3 million barrels for the week ending September 29, in U.S. data due on Wednesday, with gasoline stocks seen up 900,000 barrels after the hefty 6.3 million-barrel build in the previous week.

Crude stocks were expected to show a 700,000 barrel fall.The U.S. Energy Department said on Monday it would delay buying some 11 million barrels of replacement crude oil for the nation’s emergency petroleum stockpile through the winter heating season to keep more supplies on the market (ID:nN02388742).

Oil prices have fallen by more than 20 percent since July’s peak of $78.40 against a backdrop of healthy U.S. heating fuel stocks, forecasts of a mild winter and signs of slower growth in the world’s largest economy.

Although prices saw a brief rebound and rose to a high of $64 last week after OPEC members Nigeria and Venezuela said they would trim output, analysts say the cutbacks by Nigeria and Venezuela will have a limited impact unless larger producers in the Organization of the Petroleum Countriesfollow suit.

“The ‘voluntary’ cuts by Nigeria and Venezuela are not much more than a drop in the oil’s ocean,” said Tobin Gorey, a commodities analyst from the Commonwealth Bank of Australia.

“The market has simply concluded that OPEC is worried about too much supply but is waiting to see if other OPEC members will do anything serious about tightening it,” he said.

Nigeria and Venezuela last week pledged to cut supply from October 1 by about 170,000 bpd, less than 1 percent of OPEC’s total output.

OPEC’s second-largest producer Iran on Sunday backed any move by the 11-member group to bolster the market, while stopping short of saying it would trim its own output.

GEOPOLITICAL RISKS

But fears of supply disruptions at Iran continue to lurk as Western nations fail to reach an agreement with the world’s fourth-largest exporter’s nuclear program.

After an Iranian official said on Monday the country would not abandon its uranium enrichment, President Bush and Russian President Vladimir Putin agreed on a need to maintain unity in pressuring Tehran to abandon its nuclear program.

A fresh episode of militant attacks in Nigeria, which killed five soldiers, has also reminded dealers of potential supply cuts in Africa’s top oil producing country.

Royal Dutch Shell (RDSa.L) already has 495,000 barrels of oil equivalents per day shut down at fields it operates in Nigeria, mostly because of militant attacks.

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