November 15, 2007 / 12:20 AM / 12 years ago

Oil falls as stock build eases supply worry

NEW YORK (Reuters) - Oil slipped on Thursday after a surprise build in U.S. crude inventories eased concerns of a supply shortfall as the top consumer heads toward peak winter demand season.

A driver fills the tank of his car at a gas station in Nanjing, east China's Jiangsu province November 12, 2007. Oil drifted lower on Thursday ahead of U.S. government data expected to show a further fall in U.S. crude oil supplies. REUTERS/Sean Yong

U.S. oil CLc1 settled down 66 cents at $93.43 a barrel after dipping as low as $91.86 earlier. London Brent crude LCOc1 fell 42 cents to $90.94 a barrel.

U.S. crude oil inventories rose 2.8 million barrels last week, government data showed, countering analyst expectations for an 800,000 barrel draw. The data pushed oil further from the record $98.62 struck last week. <EIA/S>

Concerns high prices and economic problems in the United States might hurt consumption growth helped halt oil’s record rally, with the U.S. data showing a 0.7 percent dip in demand over the last four weeks compared with a year ago.

“Rather weak demand numbers are still showing up in the weekly data. That’s reflective of the trend that we’ve seen and it is only going to add to the bearishness of the report,” said Eric Wittenauer of AG Edwards in St. Louis.

Producer group OPEC lowered its world oil demand growth forecast for the fourth quarter of this year partly due to U.S economic woes.

“The U.S. consumer is facing headwinds from falling house prices, restrictions on borrowing and higher energy costs,” OPEC said in its November Monthly Oil Market Report.

Oil prices have surged nearly 40 percent since mid-August, as worries about winter supplies, the weakening dollar and geopolitical tensions drew fresh speculative investment.

Consumer nations have called upon OPEC to increase production to ease supply worries, but cartel officials insist there is no shortage of oil for global markets.

OPEC will not discuss output levels at a heads of state meeting on November 17-18, but officials said it will be on the agenda at the group’s next policy meeting on December 5 in Abu Dhabi.

“We haven’t got the agenda yet but it will certainly be among the issues to be discussed at the Abu Dhabi meeting,” Nigerian oil minister Odein Ajumogobia said.

Further demand pressure could come if warm winter weather in the United States curbs heating oil use, and some experts forecast oil could fall further.

“On balance, $90 is probably a little too high relative to oil’s fundamental basis,” said Stephen Thornber, head of global energy research at UK fund manager Threadneedle Investments.

“Speculators have made a lot of money and coming towards the end of the year possibly they will look to lock in their gains and unwind some of their positions.”

The U.S. government on Thursday forecast above-normal temperatures from December through February in the Northeast, the largest heating-oil consuming region.

Additional reporting by Jane Merriman in London and Annika Breidthardt in Singapore; Editing by Christian Wiessner

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