Oil prices lower as US gasoline reserves climb

LONDON (AFP) - World oil prices eased back from recent highs yesterday on news that US gasoline, or petrol, reserves surged higher than expected last week.

Crude futures had climbed on Tuesday to their highest peaks for around 11 months as traders fretted over persistent unrest in Nigeria, Africa's biggest producer, as well as tight US gasoline supplies.

But in London on Wednesday, Brent North Sea crude for August delivery shed 49 cents to 75.91 dollars per barrel in electronic deals.

New York's main oil futures contract, light sweet crude for delivery in August, slid 11 cents to 72.70 dollars per barrel in pit trading.

Despite high prices, OPEC Secretary General Abdullah al-Badri said Wednesday that the Organisation of Petroleum Exporting Countries would not boost output to ease pressure.

The US Department of Energy announced Wednesday that American crude oil inventories fell by 1.4 million barrels in the week ending July 6, which was more than the market expectated.

However, US gasoline reserves climbed by 1.2 million barrels, comfortably beating analysts' consensus forecasts for a gain of 825,000 barrels.

"Gasoline stocks are getting closer to normal, but we're not there yet," said Man Financial trader Andy Lebow.

"If they continue to build over the next few weeks we will be at that normal level of inventory."

Traders are focused on gasoline reserves because they are under intense pressure as Americans hit the roads for vacations during what is widely known as the US driving season.

On Tuesday, London Brent hit 76.63 dollars, an 11-month high last seen on August 10, 2006, while New York crude struck 73.08 dollars, the highest level since August 25 last year.

But high oil prices are not a result of insufficient OPEC production, Secretary General Abdullah al-Badri said Wednesday.

Badri said in a statement that "current high oil prices are not in any way related to crude supplies," but were the result of geopolitical tensions, inadequate refining capacity and market speculation.

The head of the International Energy Agency, Claude Mandil, had suggested on Tuesday that OPEC might discreetly raise production to soften oil price rises.

The 12-member OPEC cartel, which pumps more than a third of the world's oil production, has scheduled its next output meeting on September 11 in Vienna.

Despite Wednesday's modest price decreases, analysts said prices were underscored by tight oil supplies and strengthening demand from the likes of the United States and China.

"A combination of strengthening fundamentals and improving market sentiment is pushing prices sharply higher, with both Brent and New York crude having gained more than six dollars over the past 30 days," Barclays Capital analysts noted.

Prices are not very far from record highs reached last summer: 78.64 dollars per barrel in London and 78.40 dollars in New York.