Oil: Slide resumes on big inventories

Oil fell sharply to near US$63 a barrel on Thursday, extending a nearly 20 per cent slide over the past month as bulging US inventories countered geopolitical worries.

US crude CLc1 settled down 75 cents at US$63.22 a barrel after touching a five-month low of US$63.00 in intraday activity. Thursday's losses came after a 21-cent rise on Wednesday snapped a seven-session slide that lopped 12 per cent off prices, the longest losing streak in three years.

London Brent LCOV6 was down 75 cents at US$62.24, off more than a US$16 from its Aug. 8 record high and the steepest retreat since the 1991 Gulf War.

US inventory data released this week showed builds in natural gas and distillate stocks, including heating oil, increasing the world's top energy consumer's supply cushion ahead of the northern winter.

"The bearish (natgas) number basically just piled on to the bearish news throughout the energy complex, following up on the huge distillate build report in yesterday's oil stats," said Katherine Spector of J.P. Morgan.

Natural gas prices fell below US$5 per million British thermal units for the first time in two years.

Oil prices fell earlier this week on easing worries that the West's standoff with Iran of the nuclear programme could lead to a disruption in shipments by the No. 4 oil exporter.

"The possibility remains that the Iran issue could flare up again but I think the market has downgraded its premium pretty well overall," said Tobin Gorey, a commodities strategist with Commonwealth Bank of Australia.

A US official on Wednesday said Iran should face sanctions now because it was "aggressively" pursuing atom bombs, but European Union allies said it was not too late for talks.

Iranian President Mahmoud Ahmadinejad offered an olive branch, saying he was open to "new conditions" and that a dispute over his country's atomic work could be settled by negotiations. Iran says its nuclear programme is aimed at generating power and not at making weapons.

Markets were also soothed when tanker loadings resumed at Nigeria's Brass export terminal overnight after a brief break due to a strike by oil unions, ship agents said on Thursday.

A three-day strike over insecurity in the Niger Delta began on Wednesday, but oil unions suspended the strike on Thursday.

The US Department of Transportation on Thursday said it was reviewing a request by BP Plc to restart production at the eastern section of its Prudhoe Bay oil field in Alaska.

BP shut the field, the largest in the United States, in August due to severe pipeline corrosion. The oil major has restarted some production, but needs to resume output from the east to test and repair pipelines.

Underlining the view that supplies were robust, a spate of refinery run cuts across Asia deepened on Thursday.

Oil dealers were debating whether the price gains were a short-term bounce or a resumption of a four-year rally fueled by robust economic growth.

The International Monetary Fund said on Thursday the economic outlook was even stronger for next year. In its twice-yearly World Economic Outlook, the IMF raised its 2007 global growth forecast to 4.9 per cent from 4.7 per cent.

- REUTERS