Oil: Ample US fuel stocks keep price low

Oil recovered to US$72 on Thursday, making good some of the previous day's 1.8 per cent slide after a surprising build in US petrol stocks.

The possibility of United Nations sanctions against Iran, the world's fourth biggest oil exporter, would keep the price within sight of US oil's US$78.40 all-time-high, analysts said.

Traders kept a watchful eye on gathering storms in the Caribbean and Atlantic. Last year's hurricane season temporarily shut a quarter of US oil production.

US crude was up 19 cents at US$71.95 a barrel by 1541 GMT, after falling US$1.34 on Wednesday. London Brent crude was up 39 cents at US$72.41 a barrel.

"The market is stuck between petrol, which is a weight, and developing tropical storms. Then there is the steady flow of sound bites on Iran," said Olivier Jakob, an analyst at Swiss-based Petromatrix.

US data on Wednesday showed a surprising 400,000 barrel build in petrol stocks in the world's top consumer.

Nymex petrol futures dropped sharply.

BNP Paribas noted petrol stocks typically fall substantially at this time of year, adding: "The summer is over for the petrol bulls."

The downside was limited by worries over Iran.

The United States said on Wednesday that Tehran's response to incentives to stop enriching uranium fell short of the conditions set by the UN Security Council. German Chancellor Angela Merkel said Iran's reply was not satisfactory.

The Security Council has demanded Iran halt its nuclear work by a deadline of Aug. 31 or it could face sanctions. Traders fear oil supplies could be disrupted.

Oil markets paid little heed to news late on Wednesday that BP had cut another 90,000 barrels per day of oil output at its Prudhoe Bay field in Alaska because of a technical fault.

But BP's shares fell.

BP has had to shut half of the Prudhoe Bay field, the biggest in the United States, because of pipeline corrosion.

"The bad news from BP is coming in small increments," said Jakob. "Yesterday we learned there was a leak in the US Gulf."

US crude remains nearly 18 per cent up this year.

"It's fascinating how the market has managed to remain so high given the fundamentals," said John Waterlow, an oil analyst at Wood MacKenzie. "There's plenty of supply."

- REUTERS