Oil steady after gain from US gasoline stock fall

CRUDE STABLE: Oil prices steadied on Thursday, after US government data on Wednesday showed a drop in gasoline stocks. (Getty Images)

Oil prices steadied on Thursday, after US 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.

US light crude for September rose 4 cents at $126.81 a barrel by 0738 GMT, after jumping $4.58 on Wednesday.

London Brent crude eased 10 cents at $127.00 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 US gasoline stocks last week.

Additional support came from refinery problems, with BP cutting rates at its Texas City plant due to mechanical problems. Top US 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.

In Finland, Neste Oil's new 750 million euro diesel line, opened in June last year, will be shut for maintenance for about one and a half months from second-half August. The line has been facing teething problems and was hit by a fire in April, hitting its operations.

The problems at the Porvoo refinery and at other plants in northern Europe have left the region's diesel market short of supply in recent months.

The plunge in oil since hitting a record of $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 UN 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 US House of Representatives on Wednesday, as Republicans complained the measure did not also open more offshore areas to oil drilling. (Reuters)

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