(Corrects to show OPEC may cut production, not prices, in
paragraph 9)
* Oil dips, pausing after week-long slump
* Gloomy U.S. outlook, rising dollar vs euro weighs
* Weaker demand offsets surprise fall in U.S. crude stocks
(Updates prices)
By Felicia Loo
SINGAPORE, Sept 5 (Reuters) - Oil prices dipped towards $107
on Friday, extending a near 8 percent fall this week, as traders
shed commodities positions to join a dollar rally and on signs
that $100-plus prices were crippling demand.
Concerns about the health of the U.S. economy overshadowed
an unexpected drop in weekly U.S. crude oil stocks, with a
deeper draw expected this week as the industry registers the
effects of Hurricane Gustav, which shut down Gulf refineries and
oilfields.
U.S. crude <CLc1> for October delivery dipped 55 cents to
$107.34 a barrel by 0636 GMT. The contract fell on Thursday to
settle at $107.89 a barrel, its lowest since April 4.
London Brent crude <LCOc1> fell 36 cents to $105.94 a
barrel, having lost $1.76 a day ago.
"Continuing worries about the international economic
outlook, a firmer U.S. dollar, and, possibly, market speculation
that OPEC may not move production levels following next week's
OPEC meeting left oil prices softer," David Moore, commodity
strategist from Commonwealth Bank of Australia, said in a note.
The U.S. dollar rallied to its highest against the euro in
10 months on Thursday, while the European currency staged its
biggest one-day drop against the yen in a decade as investors
fled risk, with financial sector concerns the underlying theme.
[]
The dollar fell versus the yen on Friday as investors
unwound their risky carry trades, spooked by a 3 percent slump
on major U.S. stock indices a day ago and a subsequent fall in
Asia. []
Traders also awaited fresh U.S. economic indicators,
including the unemployment data, expected to show tens of
thousands more Americans likely lost their jobs last month.
OPEC meets on Sept. 9, with some expectations the cartel may
opt to cut oil production to prevent a build-up of surplus
stocks that could deepen the slump in prices, which have fallen
sharply from a July record high of $147.27 a barrel.
Iran has said the producer group may need to cut oil
supplies by as much as 1.5 million barrels per day, or nearly 5
percent, to balance global markets by early next year.
INVENTORIES DOWN, NOT UP
Traders set aside an unexpected fall in U.S. crude oil
inventories by 1.9 million barrels last week -- against a
forecast of a 200,000-barrel increase -- to focus on the likely
effects of Hurricane Gustav, which will skew next week's data.
The U.S. government inventory data also showed total demand
for oil products, such as gasoline and distillates, over the
past four weeks, fell 3.5 percent from a year ago, continuing a
trend of weak consumption in the midst of an economic downturn.
[]
Some 25 percent of U.S. crude oil production remains shut
after Gustav tore through the Gulf, and 12 U.S. oil refineries
with a total capacity of 2.428 million barrels per day remained
shut although four refineries are back to normal.
Production shutdowns in the Gulf of Mexico have already cut
7.4 million barrels of cumulative output, about a third of daily
U.S. oil consumption, according to government data.
But unlike the devastating Katrina storm, the impact from
Gustav appears to be mild.
Shell Oil <RDSa.L> said on Thursday it expected to restart
the bulk of its offshore oil and gas production over the next
several days and expected its offshore pipeline system to be
ready to handle the output. []
The company had restarted a long section of its 1.2 million
barrel-per-day Capline crude oil pipeline from Mississippi to
Illinois and expected to restart the rest of the line over the
weekend.
Hurricane Ike weakened slightly as it charged across the
Atlantic toward the Bahamas and the United States on Thursday.
Ike posed no immediate threat to land and it was too early to
say if it would enter the U.S. Gulf of Mexico.
(Editing by Ben Tan)
