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Oil prices drop on easing supply concerns
AFP
LONDON
Petroleumworld.com 05 30 07World oil prices fell strongly on Tuesday as US refineries returned to action following disruptions and as tensions eased in key producers, notably Nigeria, traders said.
Brent North Sea crude for July delivery dived 1.11 dollars from Monday's close to 68.60 dollars a barrel in electronic deals.
New York's main oil futures contract, light sweet crude for delivery in July, shed 1.85 dollars from Friday's close to 63.35 dollars in US floor trading.
US markets had shut on Monday owing to an American public holiday.
Oil supplies were set to increase as energy groups said they had fixed refinery problems, while BP's Prudhoe Bay oil field in Alaska was back to full capacity after a pipeline leak last week.
"There is no supply demand deficit in the US at the moment," Citigroup analysts said on Tuesday.
Meanwhile in Nigeria, the world's sixth biggest exporter of crude, President Umaru Yar'Adua used his inaugural address to call for an immediate cessation of hostilities in the African country's restive southern oil region.
The new leader assured Nigerians that he would "find a way to achieve peace and justice" in the Delta region, where around 180 foreigners -- mostly oil workers -- have been taken hostage by armed groups in the past 18 months.
The fall in prices, meanwhile, coincides with the start of the peak-demand season for US motor fuel. The summer driving season, which sees Americans taking to the roads en-masse for summer vacations, began on Saturday.
Oil prices in London had leapt to almost 72 dollars a barrel last week, energised in part by weak motor fuel stocks in the United States ahead of the driving season.
Saudi Arabia's assistant oil minister, Prince Abdul Aziz bin Salman bin Abdul Aziz, said on Monday that the surge in oil prices was being driven by political factors, adding there was no need for additional crude supplies.
He noted, however, that while there was no need for additional crude supplies, there was a problem with refining capacity.
The price of London Brent North Sea crude hit a nine-month peak of 71.80 dollars per barrel last Thursday. Last Monday, the New York oil contract surged to 67.10 dollars per barrel.
Despite Tuesday's drop in oil prices, concerns linger over the gasoline (petrol) situation in the United States, where demand typically rises strongly during the summer driving season.
"US gasoline inventories are not likely to quickly return to historic norms," the Commonwealth Bank of Australia said in a note to clients.
"US gasoline production is rising, which may partly alleviate the perceived tightness of the US gasoline market in time but US gasoline demand has also increased," it said.
The US Department of Energy reported last week that stockpiles of gasoline rose 1.5 million barrels in the week ending May 18 but were still "well below the lower end of the average range" for the time of year.
Sucden analyst Michael Davies said on Tuesday: "Gasoline prices at the pumps are at a record high, but demand is not thought to have been dampened."
AFP 29 1722 GMT 05 07
Copyright© 2007 AFP. All Rights Reserved.
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