(Adds OPEC comment, hedge fund manager comment, updates prices)
By Jane Merriman
LONDON, Jan 31 (Reuters) - Oil fell more than one percent on
Thursday, pressured by concerns over troubles in financial
markets despite another cut in U.S. interest rates, while rising
fuel inventories in the top energy consumer also weighed.
U.S. light crude for March delivery <CLc1> dropped $1.06 to
$91.27 a barrel by 1250 GMT, more than reversing a gain of 69
cents on Wednesday.
London Brent crude <LCOc1> lost 86 cents a barrel to $91.67.
European stock markets [] were down on Thursday
despite the hefty 50 basis point cut in interest rates from the
U.S. Federal Reserve to try to avert an economic slowdown.
Gold, a traditional safe haven for investors, was firmer,
boosted by the U.S. rate cut and a weak dollar.
"The likelihood of OPEC adding any additional barrels to the
market are rapidly diminishing amidst all the economic gloom
from the U.S.," said Rob Laughlin, analyst at broker MF Global.
Iran Oil Minister Gholamhossein Nozari said on Thursday oil
markets were well supplied and he saw no need for the
Organization of the Petroleum Exporting Countries to boost
production when it meets in Vienna on Friday. []
The prospect of a cut in OPEC output levels at some stage
has even been raised.
"With the lower seasonal crude oil requirement, then perhaps
we should take off the market what we have been recently
increasing," a delegate from one of OPEC's bigger producers
said.
U.S. SLOWDOWN
The prospect of a downturn in the U.S. economy alongside
seasonal supply/demand factors has contributed to a decline in
speculative flows into oil.
"There will be a seasonal stock build in the coming weeks
and the long-awaited exit of speculative fund capital seems to
have begun," said Markus Mezger, a partner at hedge fund
Tiberius Asset Management.
"We are not too optimistic that prices above $80 a barrel
could be sustained in 2008."
U.S. Department of Energy inventory data published on
Wednesday showed higher-than-expected builds in crude and
gasoline stocks.
The Energy Information Administration said U.S. crude stocks
rose by a bigger-than-expected 3.6 million barrels last week,
while gasoline stocks rose by 3.6 million barrels, also more
than expected. []
The Fed's latest rate cut has brought U.S. rates to their
lowest since June 2005. But it was overshadowed by speculation
of more credit rating downgrades of U.S. bond insurers, which
could bring further pain for the banking sector, already nursing
big losses from bad housing-related loans.
Oil has been supported by positive supply/demand
fundamentals and reached a record of $100.09 a barrel on Jan. 3,
buoyed partly by expectations of long-term supply constraints.
But prices have fallen back since then, largely due to fears
of a U.S. slowdown and the its impact on demand.
"The Department of Energy data continues to point to
comfortable flows that fail to confirm the market's larger
bullish hypothesis," said Tim Evans, oil analyst at Citi.
(Additional reporting by Felicia Loo in Singapore; editing by
James Jukwey)
