CNN.com - 10/5/2006
Oil hovered above $70 on Wednesday as an expected build in gasoline stocks in the United States was countered by renewed worries over Iran's nuclear stand-off with the West.
U.S. light crude eased 6 cents to $70.63 a barrel by 0525 GMT, after rising by 92 cents on Tuesday. London Brent crude fell 18 cents to $70.90 a barrel.
U.S. oil prices had lost up to over $1 on Monday after Iranian President Mahmoud Ahmadinejad wrote to his U.S. counterpart, but slid back as he made no proposals for resolving the row over Tehran's nuclear plans and Washington was dismissive of the letter.
Ahmadinejad, on a visit to Indonesia, said Tehran and Jakarta are committed to using nuclear power for good purposes, as Iran faced Western fears that its nuclear program is a cover for making nuclear weapons.
"The Iran letter turned out to be a non-event. Everyone had thought that it would have been the grounds for some negotiation and prices came off but now it is quite clear that the fall had been a knee-jerk reaction," said Tony Nunan, a manager at Mitsubishi Corp.'s risk management business.
"The short-term focus is now on the upcoming stocks data, particularly on gasoline inventories. If it builds as expected, then prices would probably drift lower but the downside will be limited as the market has been waiting for a dip to buy."
A Reuters poll forecast a 1.2 million-barrel rise in U.S. gasoline inventories ahead of the release of government data for the week ended May 5 later on Wednesday. But distillates stocks are expected to have fallen 300,000 barrels and crude inventories are seen down by 600,000 barrels.
Gasoline stocks, a major concern ahead of the U.S. summer driving season, are expected to stay high this month on an increase in production capacity as refineries return from planned maintenance, analysts said.
However, supplies are expected to be squeezed come June, when the driving season begins in earnest.
The U.S. government's Energy Information Administration (EIA) estimated that gasoline consumption will hit 9.4 million barrel per day (bpd) during the third-quarter peak demand season, up from 9.27 million bpd on-year, but down from its previous forecast of 9.43 million bpd.
Stalled talks over a United Nations resolution, ordering Tehran to halt uranium enrichment, posed nagging concerns about the geopolitical risks to oil supplies after European officials had worked on a package of rewards or penalties for Iran.
Risks to supply also persisted in Nigeria where militants, whose raids have cut oil exports in the world's eighth-largest exporter by a quarter, threatened to attack state governors from the Niger Delta region, accusing them of betraying their people's interests.