Sun, May 06, 2007 - Page 10 News List

Oil drops for fifth session in a row


World oil prices headed lower on Friday for the fifth straight trading session, despite declining US oil reserves and a rash of kidnappings in major crude producer Nigeria.

New York's main oil futures contract, light sweet crude fell US$1.26 to close at US$61.93 per barrel. In London, the price of Brent North Sea crude dropped US$0.74 to finish at US$65.31 per barrel.

Oil prices have shed more than US$4 per barrel in New York since last Friday, or nearly 7 percent of their value. They have lost US$3 in London, a decline of 4.5 percent.

Analysts said traders were focusing for an expected production ramp-up.

"Crude managed another new low for the move on Thursday, but seemed to stall right at that point, which may suggest that the downward momentum of the last several days is running out," Mike Fitzpatrick of Man Financial said.

"The Nigerian situation could be a very important swing factor for prices in the coming weeks," he said.

Investors are monitoring the latest developments in Nigeria, Africa's biggest oil exporter, where armed men have this week abducted at least 20 foreigners in three separate incidents.

Nigeria is the world's sixth-biggest oil exporter but its output is being severely hit by frequent kidnappings of foreign oil workers and attacks on pipelines.

Meanwhile, dealers said US gasoline stockpiles remained in focus ahead of the US holiday driving season, which starts later this month.

US gasoline reserves fell 1.1 million barrels to 193.1 million last week and are down 34.1 million barrels or 15 percent since early February, according to data published this week by the US Department of Energy.

Despite last week's smaller-than-expected drop, it was the 12th weekly decline in a row for gasoline stocks.

Drivers in the US were feeling the pinch, with gasoline prices topping US$3 a gallon (US$0.7925 per liter) on Friday, the highest level in nearly a year, according to a leading automobile association.

The Automobile Association of America said the average price at the pump was US$3.012 on Friday.

Gasoline prices have surged higher in recent weeks, rising as much as 15 percent in April in the New York market, amid refinery breakdowns and maintenance work that has hampered gasoline production in the US.

The Department of Energy added that US refineries had ratcheted up their gasoline production last week, with capacity utilization increasing by a half point from the prior week to 88.3 percent.

"There is some market expectation that US refinery operating rates will increase and the tightness in the gasoline market will be relieved," said Victor Shum, an analyst with energy consultancy Purvin and Gertz in Singapore.

He added that a US government announcement Wednesday that it would halt buying crude for its strategic petroleum reserve (SPR), possibly for several months, could put downward pressure on prices.

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