UPDATE 6-Oil slips on natural gas stockbuild, profit taking

                                
 (Recasts, updates prices; changes dateline from LONDON)
                                
 NEW YORK, May 15 (Reuters) - Oil prices fell Thursday as a
big increase in U.S. natural gas stocks weighed on the energy
complex, spurring profit-taking from recent highs.
                                
 U.S. crude <CLc1> settled down 10 cents at $124.12 a
barrel, after dipping as low as $120.75 a barrel earlier.
                                
 London Brent crude <LCOc1> settled 61 cents lower at
$121.25 a barrel, after a power glitch halted trade was on the
InterContinental Exchange platform for more than three hours.
[ID:nN15287873]
                                
 "Natural gas gave us a negative tone at the start of the
day. There's also likely a lot of people trying to get out of
positions and lock in some profits," said Phil Flynn, an
analyst at Alaron Trading in Chicago.
                                
 Natural gas futures <NGc1> fell 2 percent after a U.S.
government report showed a larger-than-expected increase in
stockpiles last week. [EIA/GAS]
                                
 The losses added to oil's $1.58 retreat Wednesday, which
was prompted a bigger-than-expected rise last week in
distillate stocks, easing concerns about tight diesel markets
that sent heating oil and gas oil futures to record highs this
week. [EIA/S]
                                
 Oil prices, which also hit a record this week just below
$127 a barrel, have jumped six-fold since 2002, propelled by
surging demand in China and other developing nations.
                                
 Some support came as the dollar weakened against the euro
on Thursday, after data showing U.S. industrial production fell
0.7 percent in April, reflecting the biggest drop in the
manufacturing sector since September 2005. [nN15269262]
                                
 Oil and the U.S. currency have become closely intertwined
in recent months as investors have turned to oil as a hedge
against the falling dollar.
                                
 SAUDI VIEW
                                
 Rising fuel costs have hit the economies of consumer
nations, such as the United States, which already has been hit
hard by the global credit crunch.
                                
 The Organization of Petroleum Exporting Countries has
rebuffed repeated calls from consumers to increase output,
however, blaming the weak dollar and speculative inflows into
commodities for high prices.
                                
 Oil's rise has more to do with financial market volatility
than fundamentals, Ali al-Naimi, oil minister of OPEC kingpin
Saudi Arabia, said on Thursday, according to the text of a
speech obtained by Reuters. [nSEO267530]
                                
 "The short-term oil price gyrations seen in recent years
are more closely tied to the internal logic of the financial
markets than to underlying supply/demand fundamentals," Naimi
said.
                                
 OPEC's Monthly Oil Market Report provided more evidence
that record oil prices are slowing demand growth, lowering its
forecast for world demand growth to 1.16 million barrels per
day, 40,000 bpd less than its previous forecast. [nL15510849]
                                
 Investment bank UBS raised its projection for oil prices on
Thursday to $115 a barrel for 2008. [nL15322865]
                                
 The forecast for this year is the most bullish among banks
polled by Reuters. UBS previously was the most bearish
forecaster in a poll on April 25. [O/POLL]
 (Reporting by Richard Valdmanis and Matthew Robinson in New
York; Additional reporting by Jane Merriman; Editing by Walter
Bagley)
and Alex Lawler in London, Maryelle Demongeot in Singapore)