Oil: Price slides further as petrol worries ease

LONDON - Oil fell for the fourth consecutive session today, deepening losses of more than 5 per cent this week as worries over US petrol supplies eased ahead of the summer driving season.

US light crude futures fell 88 cents to US$71.05 a barrel at 7am NZT, down more than US$4 from a record high of US$75.35 struck late last week. London's Brent crude dropped US$1.05 cents to US$71.04 a barrel.

Larger-than-expected US petrol stocks and the possible relaxation of new clean-burning petrol regulations this summer have cooled surging oil prices.

US petrol stocks fell 1.9 million barrels last week, marking the eighth consecutive weekly decline, government data showed yesterday. Analysts had expected a fall of 2.6 million barrels, as refiners empty out their storage tanks to make room for summer grades.

"Before there didn't seem to be any reason to be anything but bullish, now you have to sit back and think about it," said Mike Wittner of investment bank Calyon.

US refinery operation rates averaged 88.2 per cent last week, improving by 2 percentage points, producing more fuels as plants emerged from regular maintenance shutdowns in the first quarter, the government figures showed.

Industry analysts predicted the pull-back in prices would be temporary as there continued to be geopolitical tensions in Iran, Nigeria, Iraq and other key oil-producing countries.

Iran President Mahmoud Ahmadinejad reiterated yesterday that Tehran would not abandon uranium enrichment, a day before the UN nuclear watchdog reports on whether the Middle East nation has complied with demands it halt this work.

"We expect such tensions and in particular the escalation in the dispute over Iran's nuclear programme to continue to support market sentiment and prices," Kevin Norrish of Barclays Capital said.

The International Energy Agency's chief economist, Fatih Birol, predicted that prices would remain at current levels for the next year or two unless there was a "very big surprise."

Analysts said that China's decision to raise interest rates for the first time in 18 months had added to the momentum to sell oil because it might slow the economy. But in the longer term it could strengthen the currency and thereby increase China's oil buying power.

China, the world's second largest oil consumer, raised its benchmark one-year lending rate to 5.85 per cent from 5.58 per cent.

"If it makes China's currency appreciate against the dollar, I would imagine that ought to be a positive thing for Chinese imports, such as oil," said Wayne Harburn of ABN Amro.

- REUTERS\