Oil Energy Thread (oih)

[madrose1]

Oil slides to under $67 new five-month
By Ikuko Kao

TOKYO (Reuters) - Oil extended a week of losses to strike a new five-month low under $67 on Friday after U.S. distillate supplies rose sharply and BP said it might be able to restore its Alaskan oilfield sooner than expected.

U.S. light crude for October delivery was down 53 cents at $66.79 a barrel by 6:21 a.m. British time after hitting a low of $66.75 a barrel, briefly surpassed Thursday's trough. Prices were falling for a fifth day to stand at their lowest since April 7.

London Brent crude fell 49 cents to $66.04.

Energy giant BP Plc said its Prudhoe Bay oilfield in Alaska, partially shut since August due to pipeline corrosion, could return to full capacity above 400,000 barrels per day (bpd) by end-October -- several months earlier than many estimates -- if regulators approved its plan to bypass a corroded pipeline.

The field, which supplies 8 percent of U.S. oil, is running at about 220,000 bpd. It was not immediately clear when the U.S. government would make a decision on the matter.

BP's decision to shut down North America's biggest field sent oil prices soaring above $77 a month ago, but prices have since slumped as a thus-far mild Atlantic hurricane season and healthy global oil inventory levels soothe supply concerns.

The BP comment came after U.S. government data showed domestic oil stocks were building up more quickly than analysts expected in the first week of the shoulder season between peak summer and winter oil demand.

"Traders are comfortable selling oil for the first time in a while," Tobin Gorey, a commodity strategist at Commonwealth Bank of Australia, said in a research note.

"The U.S. inventory report last night points to comfortable supply conditions for now."

COMFORTABLE STOCKS

Distillate stocks, including winter heating oil, rose 3.1 million barrels to 139.9 million barrels in the week of September 1, much more than expected and the highest level since January 2002, the U.S. Energy Information Administration (EIA) said.

Commercial crude stocks fell by a larger-than-expected 2.2 million barrels last week, but supplies remain about 6 percent higher than a year earlier and OPEC boosted production last month to its highest level this year, a Reuters survey found.

Gasoline stocks rose by 700,000 barrels to 206.9 million barrels, against analysts' forecasts for a decline. S]

Oil prices have fallen almost 8 percent over the past two weeks and stand about $12 below record-highs above $78, with the breach of a key technical level potentially deepening losses.

On Thursday, U.S. crude settled below the 200-day moving average -- a major technical trigger for speculators -- for the first time since mid-March. It continued to trade below the average -- effective at $67.48 a barrel -- on Friday.

"That's done little except slow the rally over the past few years but there's always a first time," Gorey said.

Oil has breached the 200-day average several times since 2003, but has not remained below it for more than two weeks.

Analysts say prices have also shed much of the premium attached to concerns over Iran's nuclear row with the West as there is growing doubt over sanctions against the world's fourth-largest oil exporter.

Six world powers said after a meeting on Thursday there was growing opposition to U.S. calls for sanctions against Iran, although Tehran has failed to meet a U.N. Security Council demand that it suspend nuclear enrichment.

OPEC is expected to keep pumping at full capacity for the rest of 2006 despite ample supplies in key consumer nations. The group will meet to review its output policy on Monday in Vienna.

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Last updated: 08-Sep-06 06:36 BST