From: Associated Press
Published September 7, 2007 07:51 AM

Oil Steady After Drop in Crude Stocks

LONDON (AP) -- Oil prices were little changed Friday, a day after U.S. government data showed a larger-than-expected decline in domestic crude inventories.


The energy markets also looked forward to an OPEC meeting next week at which the group is expected to hold its output targets steady.


Light, sweet crude for October delivery on the New York Mercantile Exchange added 10 cents to $76.40 a barrel in electronic trading by midday in Europe.


October Brent crude fell 2 cents to $74.75 a barrel on the ICE Futures exchange in London.


"Crude remains well supported, with good potential to the upside," said Michael Davies at Sucden Research. "Fundamentally, the market is looking firm and could test its record highs."


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Davies said support is coming from geopolitical and supply concerns, as well as the remaining part of the Atlantic hurricane season.


Despite those factors, as well as global stock market turbulence, analysts expect the Organization of Petroleum Exporting Countries to keep its output targets unchanged when oil ministers meet Tuesday in Vienna. But that could change by the end of the year, they said, predicting that the OPEC will have to raise production if demand increases and prices get closer to $80.


In its weekly inventory report, the U.S. Energy Department's Energy Information Administration said Thursday that crude oil inventories fell by 3.9 million barrels in the week that ended Aug. 31, more than tripling analysts' average prediction of a 1.1 million barrel decline.


Gasoline inventories fell by 1.5 million barrels, slightly more than the 1.1 million barrel decline analysts surveyed by Dow Jones Newswires had expected. Refinery utilization, however, jumped by 1.8 percentage points to 92.1 percent of capacity, much more than the 0.2 percentage point increase analysts had expected.


The EIA report also showed that distillates, which include heating oil and diesel fuel, grew by 2.3 million barrels, much larger than the expected 100,000 barrel gain.


Heating oil futures dipped 7.3 cents to $2.1295 a gallon on the Nymex, while gasoline prices slipped 0.27 cent to $1.9690 a gallon. Natural gas futures dropped 10.9 cents to $5.541 per 1,000 cubic feet.


Energy futures had risen Thursday after Syrian armed forces said they opened fire on Israeli fighters that allegedly violated Syrian airspace, analysts said.


Oil traders worry that any conflict in the Middle East will escalate, drawing the U.S. in and disrupting oil supplies.


Prices were also supported by news that the U.S. Embassy in Nigeria warned that American and other Western interests in the country were at risk of a terrorist attack. Nigeria is a key supplier of crude oil, and worries about supply disruptions there often send oil futures higher.


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