Oil: BP delays Thunder Horse platform

Oil rebounded on Monday following a steep slide last week after BP announced that production from its giant Thunder Horse oil platform in the Gulf of Mexico would be delayed to 2008.

US crude CLc1 settled up 47 cents at US$63.80 a barrel, cutting into a nearly 20 per cent drop from a mid-July record high of US$78.40 a barrel. London Brent LCOc1 rose 72 to US$64.05 a barrel.

"This market's been oversold and I think we're just seeing some technical buying and bargain hunting," said Mike Fitzpatrick at Fimat USA, adding dealers were also considering BP's Thunder Horse delay.

The platform was initially scheduled to start producing in 2005, but hurricane damage and equipment problems have repeatedly stymied the start-up plans. Thunder Horse is expected to produce 250,000 barrels per day of crude, making it the largest in the Gulf of Mexico.

The Thunder Horse delay comes after BP was forced to shut down part of its Prudhoe Bay oil field in Alaska last month due to pipeline corrosion. The company also faces scrutiny over a 2005 Texas City refinery explosion that killed 15 people.

Energy prices have been dropping for more than a month, triggered by investors' realisation that ample US fuel stockpiles probably would keep the world's biggest energy burner comfortably through winter.

Prices fell nearly US$3 last week after rising inventories of US natural gas and the highest distillate fuel stocks in nearly seven years reassured consumers of adequate winter supply.

From peak to trough, oil has fallen more than US$16, the steepest retracement since the first Gulf War in 1991. But deep US$15 corrections in the autumns of 2004 and 2005 were followed by new peaks within about half a year.

Profit-taking across the commodities complex also has pressured prices and may push oil into the US$50s as technically minded speculative funds, which study charts of past price movements for clues to future direction, wield more influence.

The Reuters-Jefferies/CRB Index of 19 commodities .CRB dropped to its lowest in more than a year.

"Increased dominance of funds as the incremental buyer of oil futures has induced greater technical traits to the market," said Doug Leggate, analyst at Citigroup Investment Research.

Analysts say a fall below US$60 will spark talk of production cuts from the Organisation of the Petroleum Exporting Countries. The 11-member exporter group agreed last week to keep output steady, but left the door open to future cuts.

Opec has steadfastly refused to set a formal price target, but is on alert for any signals oil's slide could be prolonged by fundamental market imbalances or by an economic slowdown.

No new risks to supply emerged over the weekend.

China urged Iran to be more flexible about its atomic work after a week of European Union talks left officials upbeat that a dispute between Tehran and the West could be resolved.

Weather concerns also were on the back burner, with the fourth storm of the Atlantic hurricane season -- Helene -- churning over the open seas but posing no immediate threat to land, US forecasters said.

- REUTERS