Oil prices steady around $137 a barrel in Asia
Thursday, 26 June 2008

AP, SINGAPORE -- Oil prices were steady in Asian trading Wednesday amid concerns about the impact that high fuel prices are having on demand in the United States, the world's biggest energy consumer.

Investors also awaited the release of U.S. government fuel stocks data later Wednesday expected to show a drop in crude oil inventories.

''The concerns about demand destruction are real -- in particular in the U.S.,'' said Victor Shum, an energy analyst with Purvin & Gertz in Singapore. ''The market is holding its breath, waiting for the U.S. inventory report.''

In a weekly report Tuesday, MasterCard's SpendingPulse survey found that demand for gasoline in the U.S. fell 2.7 percent last week compared with the same week last year, and is off by an average of 3.6 percent over the last four weeks compared with the same period in 2007. A litany of recent reports from the U.S. Energy and Transportation departments has offered concrete evidence American consumers are driving less in response to high prices.

But demand in developing nations like China, which last week hiked state-set fuel prices, remains strong.

''Oil pricing will ease significantly only if the developing markets also show demand easing, and so far we haven't seen that,'' Shum said.

Light, sweet crude for August delivery was up 12 cents at $137.12 a barrel in Asian electronic trading on the New York Mercantile Exchange by midday in Singapore. The contract on Tuesday rose 26 cents to settle at $137 a barrel.

U.S. crude oil inventories are expected to have fallen by 1.7 million barrels last week in data from the U.S. Energy Information Administration, according to a survey of analysts by energy research firm Platts.

''With storage costs soaring and prices remaining near all-time highs, refiners will likely remain reluctant to build inventories as has been the case throughout the second quarter,'' said Linda Rafield, Platts senior oil analyst.

Analysts expect gasoline inventories to fall by 750,000 barrels while stocks of distillates, which include heating oil and diesel fuel, were projected to grow by 1.7 million barrels.

Prices drew some support from recent production outages in Nigeria. Chevron Corp. said Monday that employees of the company belonging to Pengassan, Nigeria's white-collar oil union, have declared a strike, but said it was ''still too early to comment on any potential impact of the declared work stoppage on our operations.''

But reports of the strike were denied by Babatunde Ogun, president of Pengassan.

''There's no strike,'' Ogun said. ''We're trying to settle the matter.''

Ogun said talks continued Tuesday among his union, Chevron Corp. and government mediators in Nigeria, Africa's largest oil producer and a major U.S. supplier.

Also Tuesday, OPEC President Chakib Khelil insisted that oil producers saw no need to raise supply, blaming high prices on factors such as U.S. pressure on Iran over its nuclear program and the weak dollar. Khelil's comments came days after Saudi Arabia disappointed the crude futures market by saying it would boost production less than many had hoped.

In other Nymex trading, heating oil futures were flat at $3.8136 a gallon while gasoline prices fell 0.05 cent to $3.463 a gallon. Natural gas futures lost 0.4 cent to $13.007 per 1,000 cubic feet.

Brent crude futures fell 6 cents to $136.40 a barrel on the ICE Futures exchange in London.

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