NEW YORK - Oil fell more than a dollar to fresh five-month lows today after rising US fuel inventories and the potential early recovery of full output at BP's giant Alaska oil field eased supply concerns.
US crude CLc1 slipped US$1.07 to settle at US$66.25 a barrel, the lowest settle since April 4, after trading as low as US$66.00 earlier in the day. US oil has weakened for five consecutive trading sessions, the longest losing streak for 11 months. London Brent LCOV6 lost US$1.20 to US$65.33.
"Oil's under a lot of pressure at the moment," said Bruce Evers, analyst at Investec Securities. "There's a lot of distillate and petrol about, and crude supplies are ample."
BP said today it now believes the downstream segment of the its oil transit pipeline on the eastern side of the Prudhoe Bay oil field in Alaska can safely resume operations. The field was partially shut due to pipeline damage last month.
Earlier this week the company said Prudhoe Bay may hit full capacity above 400,000 barrels per day (bpd) by end-October -- months earlier than many estimates -- if regulators approve its plan to bypass a corroded pipeline.
The field, which supplies 8 per cent of US oil, is running at about 220,000 bpd. It was not immediately clear when the US government would make a decision on the matter.
BP's comments on Prudhoe Bay came after US inventory data showed fuel stocks in the world's top oil consumer were building up more quickly than analysts expected.
"Heating oil has been unusually strong, inventories are high. Petrol inventories gave gotten much better and now the summer driving petrol season has come to an end," said Bill O'Grady, analyst for A.G. Edwards.
"Barring either a hurricane or an upswing in Middle East violence, there is probably not a lot to justify buying".
US distillate stocks, including heating oil, rose 3.1 million barrels to 139.9 million barrels in the week of September 1, the highest level since January 2002, the Energy Information Administration said.
Petrol inventories rose by 700,000 barrels to 206.9 million barrels, against analysts' forecasts for a decline.
Oil in New York has fallen from a record high of US$78.40 reached in July. On Friday, it breached a key technical support level identified by analysts who study past price patterns for clues to future direction. The breach could potentially deepen losses.
Yesterday, US crude settled below the 200-day moving average -- a major technical trigger for speculators -- for the first time since mid-March.
Oil has also shed much of the premium attached to concerns over Iran's nuclear dispute with the West, analysts say. Iran is the world's fourth-largest oil exporter.
The United States wants the UN Security Council to begin talks next week on a draft resolution that sets out sanctions against Iran for its nuclear activities, US Undersecretary of State Nicholas Burns said on Friday.
But it was far from clear whether other major world powers supported Washington's push to penalize Tehran for defying a UN demand that it freeze uranium enrichment by Aug. 31.
The Organisation of the Petroleum Exporting Countries is expected to keep pumping at high rates for the rest of 2006. The group will meet to review output policy on Monday in Vienna.