Oil: Price falls as stocks outweigh possible Opec action

NEW YORK - Oil fell on Thursday as growing US inventories outweighed concerns export cartel Opec would cut output to halt a 20 per cent slide in prices over the past two months.

US crude CLc1 settled 20 cents lower at US$62.76 a barrel after surging to US$64 earlier on news Opec members may act to stem the fall in prices.

London Brent LCOc1 was up 33 cents at US$62.54 a barrel.

"Speculation that Opec is cutting production has pushed prices higher, but we still have to confirm if there is an actual physical reduction," said Jason Schenker, an economist at Wachovia Corp. in Charlotte, North Carolina.

A senior Nigerian oil industry source said the world's No. 8 oil exporter plans to reduce supplies from Oct. 1 after consultations with other Opec producers.

But fellow Opec member Kuwait has not trimmed production, according to a Gulf oil source, who added there has been no directive so far to change output.

Oil prices have fallen from a peak of US$78.40 in July on growing US product inventories as the world's top consumer heads into the winter heating season, prompting uneasiness among some Opec members.

The Nigerian oil industry source told Reuters that Nigeria was joining Saudi Arabia, the world's biggest oil exporter, and Kuwait in an unofficial deal to trim oil supply. But this has not been confirmed by either country.

"Nigeria will cut by 5 per cent from October 1 because of the unofficial discussions between Opec members," the Nigerian source said, asking not to be named.

Edmund Daukoru, Opec's president, had told Reuters on Tuesday: "Something needs to be done to steady the price."

But Kuwaiti Oil Minister Sheikh Ali al-Jarrah al-Sabah said on Wednesday that with US crude above US$61, most Opec ministers were content with prices and not inclined now to cut output.

Last week, Ali al-Naimi, oil minister for Saudi Arabia, also described a US crude price of around US$62 as reasonable.

Opec speculation helped boost prices by almost US$2 on Wednesday, even after a weekly report showed a big jump in US fuel supplies.

Oil has fallen from its July peak because of rising US fuel stocks, easing economic growth and diminishing tension over Iran's nuclear stand-off, the steepest drop since the 1991 Gulf War.

"We had such a continuous drop in prices, so at some stage it was obvious we would see some rebound," said Frederic Lasserre, head of commodity research at Societe Generale. "It's just purely technical."

European Union foreign policy chief Javier Solana said on Thursday he had failed to reach a deal with Iran's chief nuclear negotiator on Tehran's atomic ambitions, but they had paved the way for further talks.

Iran is the world's fourth-largest oil exporter, and an agreement to end the standoff could lead to more weakness for oil prices, analysts said.

- REUTERS