(Recasts with price fall, adds comment, updates prices)
By Santosh Menon
LONDON, Feb 7 (Reuters) - Oil reversed early gains to slip
below $87 a barrel on Thursday, tracking falling global stock
markets and as evidence mounts of weakening demand in the
world's top oil consumer, the United States.
U.S. crude for March delivery <CLc1> fell 40 cents to $86.74
a barrel by 1330 GMT, on top of a $2.88 drop in the last two
sessions. London Brent crude <LCOc1> fell 46 cents to $87.32.
Oil was helped briefly by production shutdowns in the North
Sea and in Nigeria, but reversed ground as stock markets fell in
Europe and appeared headed for a weak start in the United
States. []
Oil prices fell on Wednesday after a government report
showed a surprisingly big build in U.S. petroleum stockpiles,
pointing to weaker demand ahead.
U.S. crude stockpiles rose 7 million barrels last week, well
above forecasts for a 2.6 million barrel build, while gasoline
stocks rose 3.6 million barrels to their highest level since
February 1994. []
Refinery production rates slipped another 0.7 percentage
points to stand a full 3 percentage points below a year ago,
with weak underlying demand dampening profits, analysts said.
Analysts said the data was the latest in a steady stream of
bad news on the U.S. economy despite aggressive interest rate
cuts by the Federal Reserve to ward off a recession.
"Instead, it seems that problems are getting worse...We
would not be surprised to see a much sharper break in crude oil
prices over the next few weeks," said Edward Meir at MF Global.
OUTLOOK
Oil prices have tumbled from their January record above $100
on mounting concerns of the U.S. recession, and traders said the
market appeared to disregard bullish news such as recent
production shutdown in the North Sea and Nigeria.
Royal Dutch Shell said on Thursday it was halting 130,000
barrels per day of output because of pipeline leaks. This came a
day after Total announced it had shut around 280,000 barrels of
oil equivalent in output from its North sea oilfields.
"At the end of last year, if you had news like this, it
(oil) would be hitting new highs. Now every time there is a
rally, it seems to get sold into. I think funds are continuing
to liquidate their positions," said Christopher Bellew at Bache
Commodities.
In addition to the souring economic outlook, fuel demand has
been curbed this winter by milder than usual weather in the U.S.
Northeast, normally a big consumer of heating oil.
The National Weather Service eight to 14-day outlook
released on Wednesday called for normal or below-normal
temperatures for the northern half of the United States, with
above seasonal readings expected for the rest of the country.
A Reuters poll showed world oil demand growth losing
momentum in 2008 as high prices and a slowdown in the world's
industrialised nations led by the United States hit consumption.
The poll of 20 analysts forecast average world oil demand
growth this year at 1.43 million bpd, down from 1.56 million bpd
in a similar poll last August and well short of International
Energy Agency's forecast of 1.98 million bpd. []
(Additional reporting by Jonathan Leff; Editing by James
Jukwey)
