Oil drops more toward $60 on ample supply
Tue Oct 3, 2006 7:09am ET
LONDON (Reuters) - Oil fell further toward $60 a barrel on Tuesday, extending Monday's steep drop on forecasts of a further increase in fuel inventories in top oil consumer the United States.
U.S. distillates stocks, which include heating oil, probably rose last week, analysts polled by Reuters said. As oil slips further from a July peak, traders are watching for signs OPEC may act to support prices.
"Given comfortable middle distillate stocks, it's hard to see a real supply worry in the winter," said Mike Wittner, analyst at Calyon investment bank. "If the price comes off another couple of dollars, we'll see more action out of OPEC."
U.S. crude <CLc1> lost 67 cents to $60.36 a barrel by 1053 GMT, after falling as low as $60.22, the lowest since September 27. London Brent <LCOc1> dropped 65 cents to $59.80.
Further easing prices, the U.S. Energy Department told Reuters on Monday it would delay buying some 11 million barrels of crude for the nation's emergency reserve through the winter to keep more supply on the market.
Moves by OPEC members Nigeria and Venezuela to trim output have yet to stem the slide. The measure will have little impact unless larger Organization of the Petroleum Countries producers follow, analysts say.
Nigeria and Venezuela last week pledged to cut supply from October 1 by about 170,000 barrels per day, less than 1 percent of OPEC's total output.
"The Nigerian and Venezuelan announcements are significant, but they don't remove a lot of oil from the market," Wittner said. "Saudi Arabia has been conspicuous by its silence
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.
Oil has lost more than 20 percent since July's peak of $78.40 due to healthy U.S. heating fuel supplies, forecasts for a mild winter and signs of slower economic growth in the world's largest economy.
"We continue to see oil prices as having overshot to the downside from a fundamental perspective, but acknowledge that in the short term at least there is risk of further moves to the downside," Barclays Capital said in a report.
Analysts expect U.S. stocks of distillates, already at a seven-year high, to rise 1.3 million barrels in the week to September 29. The U.S. government's latest supply report is due out on Wednesday.
Gasoline stocks are forecast to rise by 900,000 barrels and crude inventories to fall by 700,000 barrels. <EIA/S>
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