* Oil falls as U.S. data shows soft demand
* U.S. refineries, oil production still hobbled by Gustav
(Recasts, updates prices, market activity to settlements, new
byline, dateline, previously LONDON)
By Richard Valdmanis
NEW YORK, Sept 4 (Reuters) - Oil fell by more than $1 on
Thursday as concerns over weak demand in a softening U.S.
economy outweighed an unexpected drop in U.S. crude oil
inventories and continued production problems in the wake of
Hurricane Gustav.
U.S. crude <CLc1> fell $1.46 to $107.89 a barrel, extending
a slide from the all-time peak in mid-July of over $147. London
Brent crude <LCOc1> fell $1.76 to $106.30.
"I've got to believe that the market, in its wisdom, is
looking at other factors and is preoccupied with the state of
the economy, declining demand and a strengthening dollar," said
Peter Beutel, president of Cameron Hanover, New Canaan,
Connecticut.
U.S. government inventory data 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. []
The U.S. dollar's further rebound encouraged oil's losses
by weakening the spending power of buyers using other
currencies, dealers said.
The oil market shrugged off a government report showing
crude U.S. oil inventories fell 1.9 million barrels last week,
compared with a forecast of a 200,000 barrel increase.
Those inventories are likely to keep sliding in coming
weeks as the U.S. energy sector makes slow progress in its
recovery from Hurricane Gustav, with some 25 percent of U.S.
crude oil production still shut in the storm's wake.
[]
Production shutdowns in the Gulf of Mexico already have cut
7.4 million barrels of cumulative output, about a third of the
amount of oil the United States consumes in a day, according to
government data.
But dealers said demand is also likely to slow sharply,
with some 11 percent of the nation's refining capacity shut
down by Gustav. Refiners use crude oil to make fuels like
gasoline and diesel.
Hurricane Ike, meanwhile, strengthened into an extremely
dangerous Category 4 hurricane in the open Atlantic, although
it posed no immediate threat to land.
Traders are awaiting OPEC's Sept. 9 meeting. Analyst PFC
said a consensus was building within OPEC to cut output to
support prices and prevent a supply overhang from developing.
[]
Iran has said the producer group may need to cut oil
supplies by as much as 1.5 million barrels per day (bpd),
nearly 5 percent, to balance global markets by early next
year.
(Additional reporting by Ikuko Kao, Matthew Robinson and Joe
Brock in London and Chua Baizhen in Singapore; Editing by David
Gregorio)
