Oil: Prices hit low for 2006

Oil fell below US$58 on Wednesday to match its lowest level this year, as Opec haggled over details of an output cut and the West's energy watchdog cut its demand growth forecasts.

US crude CLc1 fell 92 cents to US$57.60 a barrel by 1:54 p.m. (1754 GMT), after matching the 2006 low of US$57.55 struck in February. London Brent crude LCOc1 was down 70 cents at US$58.64.

Opec ministers were united on the need to remove a million barrels from oil supplies to prop up falling prices, but divided on how to do so. News of a voluntary supply cut emerged from Nigeria nearly two weeks ago, on Sept. 28.

"Are they going to cut or aren't they? It's amazing that it has been nearly two weeks since the first word on this cut," said Chip Hodge, managing director at John Hancock Financial Services in Boston. "But then it has been a long time since the last Opec cut and this shows how it is never easy to get everybody on board for a cut."

The main stumbling block appears to be whether to make a reduction from the notional 28 million-barrel per day (bpd) production ceiling for the 10 Opec members with output limits, or from the group's actual supply of nearly 27.5 million bpd in September.

Qatar's oil minister Abdullah bin Hamad al-Attiyah told reporters he expected the cut to come from actual output. He said a statement could be issued within two or three days or the group could meet sometime between Oct. 16-18.

"There is consensus for the 1 million cut, there is no objection," he said. "The (Opec) president should now decide whether there should be a statement or a meeting somewhere."

The price of oil has fallen nearly US$20 from July's peak of US$78.40.

LOWER DEMAND

The International Energy Agency (IEA) trimmed its forecast for global oil demand growth next year by 90,000 bpd to 1.45 million bpd on slightly weaker US demand.

The IEA, adviser to 26 industrialised nations, revised its forecast for US demand growth after the International Monetary Fund (IMF) last month cut its forecast for US economic growth in 2007.

Some investors said Opec's cut may be too little or come too late to offset swelling inventories and slowing demand forecasts.

"Basically fundamentals are weak with accumulated stocks of crude oil and products, and maybe decreasing demand from Asian markets, other than China, and the US," said Keiichi Sano, manager with the commodities business unit at Sumitomo Corp.

US data due on Thursday -- a day later than usual -- is expected to show a 100,000 barrels rise in distillate stocks, a Reuters survey found. EIA/S

Stocks were already at their highest level since January 1999 the previous week and mild temperatures have stemmed demand for heating fuels.

Crude stocks were expected to rise 800,000 barrels.

US government weather forecasters said on Tuesday they expected El Nino to bring warmer-than-average temperatures across much of the country for the winter season.

Also bearish for prices is that Iraq pumped crude exports through its vulnerable northern pipeline to Turkey on Wednesday for the first time in over a month.

Sabotage attacks have mostly idled the line since the US-led invasion of Iraq in March 2003.

- REUTERS