Commodities

Thursday July 31, 04:35 AM
Oil steady after gain from U.S. gasoline stock rise

TOKYO, July 31 (Reuters) - Oil prices steadied on Thursday, after U.S. government data on Wednesday showed an unexpected drop in gasoline stocks as suppliers facing weak consumer demand cut production and imports, sending prices surging more

than $4.

The rebound on Wednesday came after oil prices pulled back sharply since hitting an all-time peak above $147 on July 11, on concerns over falling demand, especially in the United States, the world's largest oil consumer.

U.S. light crude for September <CLc1> was unchanged at $126.77 a barrel by 0234 GMT, after jumping $4.58 on Wednesday.

London Brent crude <LCOc1> was down 12 cents at $126.98 a barrel.

'Although oil prices have fallen around $20 from their peak, support at $120 held and that means there is the potential for prices to rise back to record levels again,' said Shuji Sugata, manager at Mitsubishi Corp Futures and Securities Ltd in Tokyo.

The rise came after data late on Wednesday showed a larger-than-expected decrease in U.S. gasoline stocks last week, as suppliers facing weak consumer demand cut production and imports. [EIA/S]

Additional support came from refinery problems, with BP (LSE: BP.L - news) cutting rates at its Texas City plant due to mechanical problems. Top U.S. refiner Valero plans to cut gasoline production by an average of 330,000 barrels per day (bpd) in the third quarter at its 16 plants.

The plunge in oil since hitting a record $147.27 on July 11 is the steepest drop from a high since early 2007. Oil was hit by signs that costly fuel and wider economic problems were curbing demand.

Strong growth from emerging economies such as China has stretched poor supply growth over the past six years, launching a rally that sent crude up sevenfold at its peak.

Further strength has come from investors buying commodities as a hedge against inflation and the weak dollar, tensions between Iran and the West, and supply disruptions.

Iran will press ahead on its nuclear path, the country's highest authority, Supreme Leader Ayatollah Ali Khamenei, said on Wednesday, speaking just before a deadline set by Western officials in a nuclear dispute.

Western powers gave Iran two weeks from July 19 to respond to their offer to hold off on imposing more U.N. sanctions on Iran if Tehran would freeze any expansion of its nuclear work.

Rival militant factions in Nigeria's oil-producing Niger Delta have clashed in an apparent turf war, killing at least four people, security officials said on Wednesday.

Militant attacks have disrupted supplies from the OPEC nation this year, helping to push up oil prices.

A bill aimed at preventing excessive speculation in oil and other futures trading did not get enough votes to pass in the U.S. House of Representatives on Wednesday, as Republicans complained the measure did not also open more offshore areas to oil drilling.

(Editing by Ben Tan)

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