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Bloomberg: Oil Is Steady After Falling From 10-Month High on Lower Demand

By Christian Schmollinger and Shigeru Sato

July 10 (Bloomberg) — Crude oil was little changed in New York after falling from a 10-month high yesterday on signs demand will ease following U.S. refinery shutdowns.

BP Plc is shutting the largest of three crude units at its refinery in Whiting, Indiana, a person familiar with the plant said. Units were shut at refineries in Texas and Kansas last week. Oil inventories are 12.5 percent higher than their five- year average, said a July 5 U.S. Energy Department report.

“There’s a fair bit of crude around in the U.S. at the moment and refineries have been reasonably slow,” said Tobin Gorey, commodity strategist at Commonwealth Bank of Australia Ltd. in Sydney. “The refineries have had quite a few problems keeping things running.”

Crude oil for August delivery was at $72.04 a barrel, down 15 cents, in after-hours electronic trading on the New York Mercantile Exchange at 2:43 p.m. in Singapore. Yesterday, the contract dropped 62 cents, or 0.9 percent, to settle at $72.19, the first decline in eight sessions.

BP will shut a 250,000 barrel-a-day processing unit at Whiting for unplanned maintenance, the person said. A second 75,000 barrel-a day facility is closed as well. Gasoline demand typically peaks in the U.S., the world’s biggest oil consumer, from June to August during the summer holiday period.

“The refinery outage will push the country’s crude oil requirements lower,” said Tetsu Emori, chief commodity strategist at Astmax Futures Co. in Tokyo. “Oil prices might have peaked as the U.S. summer driving season is coming to an end in a few weeks.”

Inventories Climb

U.S. crude-oil supplies probably rose 200,000 barrels last week from 354 million the prior week, according to the median of 14 responses in a Bloomberg News survey. Stockpiles in the week ended June 29 were the highest since May 15, 1998, the Energy Department reported last week.

Speculative long positions in crude futures, or bets prices will rise, outnumbered short positions by 96,147 contracts on the Nymex, the Commodity Futures Trading Commission said in its Commitments of Traders report. Net-long positions rose by 28,983 contracts, or 43 percent, from a week earlier.

Gasoline stockpiles probably climbed 900,000 barrels in the week ended July 6 from 204.4 million barrels the prior week, according to the median of responses by 13 analysts before an Energy Department report this week. Twelve of the analysts expected a gain and one said there was a decline.

Gasoline for August delivery was trading at $2.3460 a gallon, after rising 1.5 percent yesterday to $2.3446, the highest close since May 25.

The government’s supply report is scheduled for release tomorrow at 10:30 a.m. in Washington.

“Robust U.S. gasoline demand has well supported the bullish momentum in oil prices over the past days of trade,” said Masaki Suematsu, an adviser at Tokyo-based brokerage Himawari CX Inc.

North Sea Oil

In London, Brent oil for August settlement declined 28 cents, or 0.4 percent, to $75.50 a barrel on the ICE Futures exchange at 2:45 p.m. Singapore time. The contract closed at $75.78 yesterday, the highest since Aug. 9.

Brent had risen yesterday on reports of output disruption at fields in the North Sea.

ConocoPhillips has stopped exporting oil from its J-Block field in the North Sea because of the closure of the CATS natural-gas pipeline. J-Block produced 13,000 barrels a day in 2005, according to the company’s Web site.

CATS Pipeline

BP may also be forced to stop production at the Andrew, ETAP, Everest and Lomond fields in the North Sea after the CATS pipeline closed, company spokesman Richard Grant said. The fields produce gas, transported through the pipeline, and crude oil that flows into the Forties Pipeline System.

Closing CATS and shutting the gas fields may mean BP will have to stop oil production at the fields as well if it can’t re-inject the gas into the reservoirs or burn it off. Grant couldn’t confirm whether any of the oil fields had been shut.

Apache Corp., a U.S. oil and natural-gas producer, said it will idle two of its North Sea oil platforms for routine maintenance starting Aug. 10. The work is expected to take 16 days and will defer about 320,000 barrels of oil production, Apache spokesman David Higgins said today.

Nigeria Kidnappings

Four oil workers, including one staff member of Royal Dutch Shell Plc’s Nigerian venture, were kidnapped in two incidents over the weekend, government and company officials said yesterday.

A staff member and a contractor, both Nigerian nationals, were abducted while repairing the Soku-Bugama pipeline on July 7, said Precious Okolobo, a spokesman for Shell’s Nigeria venture.

A Briton and a Bulgarian, employees of the Nigerian company Manipolu, were taken on July 8 after several speedboats attacked an oil installation on the Calabar River, Alisdair Walker, a spokesman for the British High Commission in Abuja, said.

The kidnappings highlight the increasing instability in Nigeria’s oil producing region. More than 200 expatriates and at least as many Nigerians have been kidnapped in the region since the beginning of last year. Gunmen freed a 3-year-old British girl on July 8 after abducting her on July 5.

To contact the reporters on this story: Christian Schmollinger in Singapore at [email protected] ; Shigeru Sato in Tokyo at [email protected] .

Last Updated: July 10, 2007 02:50 EDT

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