An OPEC report predicting it could take years for demand for its crude to recover from the financial crisis added to bearish sentiment.

U.S. light crude for August delivery dropped $1.24 to $61.69 a barrel by 1444 GMT. It settled $1.12 lower at 62.93 a barrel on Tuesday, ending a fifth straight day of losses.

London Brent crude fell $1.15 to $62.08.

U.S. government weekly data showed gasoline stocks had risen by 1.9 million barrels, more than expectations for a 600,000 barrel increase.

Distillate stocks, including diesel, climbed by 3.7 million barrels, compared with an expected two million barrel rise. They stood at their highest level in nearly 25 years.

Figures from the American Petroleum Institute (API) late on Tuesday also showed distillate stocks and gasoline stocks had risen more than expected.

“It looked like gasoline demand had started to get better and now suddenly looks bad. It could be for a couple of reasons: it could be a price response or it could just be that the economy is just not out of the woods yet,” said Tony Nunan, risk manager at Mitsubishi Corp in Tokyo.

Oil prices have dropped from peaks above $70 a barrel last month, the highest this year, as expectations of an early economic recovery have faltered and U.S. fuel stocks have risen in line with subdued demand.

REGULATORY FEARS

The market was also monitoring the meeting of the Group of Eight major industrialised nations in the central Italian city of L’Aquila, which continues until Friday.

Oil analysts largely dismissed the G8 calls for reduced volatility in energy markets.

They said a statement from U.S. regulator the CFTC this week that it was considering tougher position limits to try to curb speculation was far more significant. It could add to selling pressure, although it would take months for any regulatory changes to take effect, they said.

“It does dampen sentiment,” said Mike Wittner of Societe Generale.

Analysts said the impact would be greater on U.S. crude than on the European benchmark Brent, which is mostly overseen by British regulator the FSA.

Brent’s current premium to U.S. crude could also be explained by the disruption of supplies of Nigerian oil, which has helped to boost other Atlantic basin crudes, including Brent.

Nigeria’s most prominent militant group said on Wednesday it had sabotaged oil pipelines, as it deepened a six-week long offensive against Africa’s biggest energy industry.

The enforced shut-in of Nigerian crude has helped to tighten supplies from the Organization of the Petroleum Exporting Countries.

Discipline from the group has lapsed and compliance with agreed output curbs has been estimated at around 75 percent, down from peaks of roughly 80 percent earlier this year.

OPEC’s 2009 World Oil Outlook released on Wednesday said consumption of its crude would not return to 31 million barrels per day (bpd), the level it averaged in 2008 before the economic crisis cut oil use, until 2013.

In the medium term, consumption would fall to 84.2 million bpd this year from 85.6 million bpd last year, and rise to 87.9 million bpd by 2013, the report said. The 2013 figure was 5.7 million bpd less than previously expected.

LONDON (Reuters)

Oil held around $40 a barrel on Thursday after U.S. crude stocks swelled to an 18-month high and investors anticipated more bleak economic data out of the world’s biggest fuel consumer.

The outlook for more huge job losses in the United States darkened the demand prospects there.

A global financial slowdown has cut demand and swollen fuel stocks, knocking more than $100 a barrel off the price of crude since its July 2008 peak of $147.

U.S. crude inventories jumped by 7.2 million barrels to an 18-month high last week, data from the U.S. Energy Information Administration showed, twice what analysts expected and the sixth straight weekly rise.

U.S. light crude for March delivery ticked up 2 cents to $40.34 a barrel at 1019 GMT, about $4 below London Brent crude for the same month, which gained 30 cents to trade at $44.45 a barrel.

U.S. crude has been locked between $39 and $49 a barrel for the past two weeks.

“Crude oil markets still seem to be trapped within a trading range, as market anticipation about OPEC cuts — both current and pending — is keeping something of a floor below prices,” MF Global said in a report.

“…The upside is capped by lingering concerns over the macro situation.”

Oil losses have been limited by signals this week from the Organization of the Petroleum Exporting Countries that it may cut oil production further in an attempt to bolster the market.

OPEC, worried that the global economic downturn is reducing oil demand and pressuring prices, has promised to reduce oil production by a total of 4.2 million barrels per day (bpd) from levels seen in September.

LONDON, Feb 5 (Reuters)

Stocks of distillates grew by 6.4 million barrels last week amid weak demand, while crude and gasoline inventories also rose, the Energy Information Administration said.

“Inventories continue to build. This morning we had negative sales numbers. This is more economic weakness affecting demand,” said Tom Bentz of BNP Paribas Commodity Futures in New York.

U.S. crude was down $2.08 at $35.70 a barrel by 1618 GMT after earlier hitting a high of $39.45. London Brent crude fell 88 cents to $43.95 a barrel.

The inventory report added further pressure to prices after weak U.S. retail sales data sparked selling earlier in the session.

The U.S. Commerce Department said total retail sales fell 2.7 percent to a seasonally adjusted $343.2 billion last month. Analysts polled by Reuters had forecast December retail sales falling 1.2 percent.

“The retail sales figures are horrible. They confirm that the United States is in recession, which means oil demand is falling and so the market is weakening,” said Rob Laughlin, senior oil analyst at MF Global.

The global financial crisis, the worst since the 1930s, has pushed much of the industrialised world into recession, causing oil demand to slump and crude prices to tumble by more than $100 from its record peak of above $147 a barrel last July.

Oil producers in the Organization of the Petroleum Exporting Countries have responded to the recession by cutting output.

Top exporter Saudi Arabia said on Tuesday it was prepared to go even further than cuts it had made since December if the market warranted it, while OPEC’s secretary general said the group may reduce oil output again at its meeting in March.

Libya’s top oil official said on Wednesday OPEC’s existing oil output cuts should support oil prices and that it was too early to tell if a further production reduction.

OPEC decided to cut supply by 2 million bpd at meetings in September and October. In December, it agreed to lower output by a further 2.2 million bpd as of Jan. 1, a record reduction.

So far OPEC’s moves have had little obvious impact on the market and oil for prompt delivery is trading at a big discount to future barrels with the market in what is called a contango.

The front-month U.S. crude contract is also at a record discount to North Sea Brent crude futures with a spread of nore than $8 a barrel between the two contracts.

LONDON, Jan 14 (Reuters)

Oil was higher on Wednesday, but cut back early gains after U.S. inventory data showed fuel stocks in the world’s largest energy consumer rose sharply last week.

U.S. crude for January delivery touched $45 a barrel on Tuesday, recovering from an overnight slump by more than 4 percent, but by 1618 GMT oil had trimmed gains to trade at $43.07, up $1.00.

London Brent crude was up 48 cents at $42.04.

U.S. crude oil inventories rose by 400,000 barrels to 320.8 million, with distillate and gasoline stocks also up, according to the U.S. Energy Information Administration (EIA). Refinery run rates rose to 3.1 percent to 87.4 percent.

“If you were an oil bear and you were looking for a Christmas gift, you got everything you wanted in this report,” said Phil Flynn, analyst at Alaron Trading in Chicago.

Rising fuel stocks in the United States and other consumer nations have heightened fears of slowing demand for fuel as the global economic slowdown starts to cut into consumption.

The market now looks to OPEC’s Dec. 17 meeting in Algeria where the group is expected to cut as much as 2 million barrels a day in a bid to shore up prices which have fallen by more than $100 dollars since peaking above $147 a barrel in July.

Russia’s energy minister on Wednesday said OPEC members were preparing a “significant cut” in oil production, and that Russian output was likely to decline in 2008 despite government attempts to stimulate production.

Sergei Shmatko also said Russia, the largest oil producer outside the producer group, would make its own proposal at the Algeria meeting, which it will attend as an observer.

“Sentiment rules the oil market at the moment, with most traders tracking equities,” said Andrey Kryuchenkov, vice president of commodities research at VTB Bank.

“A lot of people will wait to see how much OPEC will but by next week, and then whether then can comply with the quota cuts.”

China’s November crude oil imports hit a year low, as the world’s secong-largest oil user shipped in 13.36 million tonnes last month, official data showed, a 14.6 percent cut in daily volumes from October and 1.8 percent down on November last year.

U.S. weekly inventory report shows fuel stock rise sharply… Year-on-year rise in U.S. gasoline purchases- Mastercard… Russia says OPEC to make “significant cuts”

Chris Baldwin
LONDON, Dec 10 (Reuters)