* U.S. regulator reports big increase in net length.
* Saudi supplies set to be steady in September
* Oil prices not bad at current levels - OPEC head
* Possibility of first tropical cyclone of hurricane season
(Updates throughout)
By Barbara Lewis
LONDON, Aug 10 (Reuters) - Oil prices dipped below $71 a
barrel on Monday as traders focused on swollen inventories and
prospects for a stronger dollar.
U.S. crude <CLc1> fell 35 cents to $70.58 a barrel by 1226
GMT. London Brent crude <LCOc1> fell 5 cents to $73.54.
Modest price support was provided after the U.S. National
Hurricane Center said a low pressure system southwest of the
Cape Verde Islands could develop into the first tropical cyclone
of the Atlantic hurricane season. []
Traders watch for storms with the potential to enter the
Gulf of Mexico and to disrupt oil and gas infrastructure there.
U.S. crude futures gained a modest 2 percent over the course
of last week but closed lower on the day on Friday, following
U.S. data that showed the first drop in unemployment in 15
months.
That was regarded as raising the chances of higher interest
rates before the year-end and gave a surprise boost to the U.S.
dollar, although it weakened early on Monday against a basket of
currencies. <.DXY>
"The U.S. payrolls data would have been supportive for
crude, but investors are now focusing on the strength in the
U.S. dollar," said David Moore, a commodities analyst at the
Commonwealth Bank of Australia.
For much of this year, oil prices have risen in line with
gains on equities and have been negatively correlated to the
dollar. A stronger dollar can be bearish for dollar-denominated
commodities, which effectively become more expensive to
non-dollar buyers.
Analysts have said those relationships, which were only ever
provisional, could have begun to shift as the market returns its
focus to fundamentals of supply and demand.
Tokyo shares hit a 10-month closing high on Monday, but
European shares faltered after Friday's broad-based rally. []
The MSCI world equity index <.MIWD00000PUS> edged 0.04
percent lower after hitting its highest since October on Friday.
INVENTORIES STILL SWOLLEN
Demand for fuel should recover, if the economic recovery
suggested by this year's stock market rally so far is to be
believed, but in the immediate term inventories are still
brimming. []
Although last week was positive overall for the oil price,
the more striking movement was the rise in long positions,
regarded as a bet on future price strength, reported by the U.S.
regulator the Commodity Futures Trading Commission.
In a report released on Friday, the CFTC said crude oil
speculators on the New York Mercantile Exchange had increased
their net long positions sharply in the week to Aug. 4.
[]
"The price did not move a lot, but the week was very
positive on the investment side," said Olivier Jakob of
Petromatrix. "The weekly additions to the long futures positions
were at the highest level of the year."
That should underpin the oil price, which at above $70 is
"not bad" from the standpoint of the Organization of the
Petroleum Exporting Countries, the group's president said over
the weekend. []
The group next meets to reconsider policy on Sept. 9 in
Vienna.
It has agreed to curb output by 4.2 million barrels per day
from production levels last September and is delivering 71
percent of that pledge, a Reuters survey found. []
Leading exporter Saudi Arabia was expected to provide
broadly steady supplies in September compared with August to
European and Asian refiners, industry sources said on Monday.
[]
(Additional reporting by Fayen Wong, Jonathan Leff and Osamu
Tsukimori, editing by Anthony Barker)
