MercoPress. South Atlantic News Agency

Oil prices continue to slide

Oil prices fell by almost $1 a barrel on Friday, dipping below $67 as traders focused on slackening demand and rising supplies.

Crude futures have pulled back by almost 14 percent in the past month. The Atlantic hurricane season so far has been tame and there is growing scepticism that the diplomatic standoff between the West and Iran will prompt OPEC's No. 2 producer to pull supply off the market.

"The sentiment of the market is to sell," said Mike Guido, director of commodity strategy at Societe Generale in New York.

Gasoline demand traditionally slips after Labor Day and it will be a month or more before demand for heating oil and other winter fuels picks up in many parts of the country.

Supply worries eased Thursday after government data showed rising inventories of gasoline and distillate, which includes heating oil. The possibility that BP PLC could restore 180,000 barrels per day of lost Alaskan production at Prudhoe Bay by the end of October also eased supply fears. The market also anticipates the resumption of some oil production that was shut in Nigeria following militant attacks.

The Organization of Petroleum Exporting Countries meets next week, but analysts do not expect the cartel to alter its official output quota of 28 million barrels per day. If the cartel trims production in an attempt to prop up prices, analysts say the strategy could backfire because it would signal to a market that has worried for several years about tight supplies that the world finally has oil to spare.

Light sweet crude for October delivery on the New York Mercantile Exchange declined by 92 cents to $66.40 a barrel. Gasoline futures fell by more than 3 cents to $1.61 a gallon.

October Brent crude on the ICE Futures Exchange was down 30 cents at $66.23 a barrel.

U.S. crude inventories fell 2.2 million barrels last week to 330.6 million barrels, according to the U.S. Department of Energy. However, inventories remain 6.2 percent above year-ago levels and rising productivity by refiners has pushed up supplies of motor- and home-heating fuels.

Gasoline inventories rose by 700,000 barrels to 206.9 million barrels, which is 6.6 percent above year-ago levels. Distillate fuel inventories rose by 3.1 million barrels to 139.9 million barrels - a bigger build than most analysts expected. They are now slightly above were they were a year ago.

BP officials testified to U.S. lawmakers on Thursday about the company's operational lapses in Alaska - a big oil spill in March and then the partial shutdown of the country's largest oil field last month. BP is currently pumping 220,000 barrels a day and Steve Marshall, the president of BP Exploration Alaska Inc., said output could be restored to 400,000 barrels per day as early as the end of October.

Separately, Royal Dutch Shell PLC said Thursday it was putting 180,000 barrels of crude per day back on line in Nigeria, according to Dow Jones Newswires. Shell had taken the oil supply off line July 20 following a construction accident that damaged a key pipeline.

Nigeria, Africa's largest oil producer, has cut about a fifth of its usual production because of militant attacks