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Oil continues slide after US gasoline build

(Reuters) / 24 August 2006

SINGAPORE/LONDON - Oil slipped further below $72 a barrel on Thursday, extending the previous day’s two percent slide started by surprising increase in US gasoline stocks.

Support came from the potential for Iran’s nuclear dispute with the West to lead to United Nations sanctions against the world’s fourth largest oil exporter.

US crude CLc1 was down 10 cents at $71.66 a barrel by 0929 GMT, after falling $1.34 on Wednesday. London Brent crude LCOc1 was down 10 cents to $71.92 a barrel.

BP BP.L said late Wednesday that production at Prudhoe Bay fell to 110,000 barrels per day (bpd), down 90,000 bpd after a technical fault that would last several days. The Alaskan field had previously been running at about half its normal capacity.

The reduced output helped push down US crude oil stocks last week, although the drop was smaller than expected.

However, US gasoline inventories posted a surprise 400,000 barrel build and Nymex gasoline futures HUc1 dropped sharply. They continued to slide on Thursday, off 1.18 percent.

“The NYMEX unleaded gasoline contract has been flushing dramatically in recent weeks, down $15 plus a barrel so far this month, as length shifts out of the contract,” JP Morgan said.

BNP Paribas noted gasoline stocks typically fall substantially at this time of year. “The summer is over for the gasoline bulls,” the bank added.

Weather forecasters eased worries over Tropical Storm Debby, the fourth of the 2006 Atlantic hurricane season, which weakened on Wednesday and moved on a path towards Bermuda and away from US Gulf Coast oil production.

Price losses were limited by worries over Iran. The United States said on Wednesday that Tehran’s response to incentives proposed by six world powers fell short of the conditions set by the UN Security Council.

Iran said its reply on Tuesday to the package aimed at ending the dispute contained ideas that would allow serious talks, but showed no sign of agreeing to a key demand to halt uranium enrichment.

The UN Security Council has demanded Iran halt its nuclear work by a deadline of Aug. 31 or it could face sanctions, which traders fear could lead Iran to disrupt oil supplies.

US crude remains nearly 18 percent up this year, though they have fallen back from a record-high of $78.40 in July.

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