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Oil steady in Asia ahead of US inventory report

Oil prices were steady on Thursday in Asia above $109 a barrel as investors waited for a weekly US crude inventory report for evidence that slowing economic growth has cut demand.

business Updated: Sep 04, 2008 11:50 IST

Oil prices were steady on Thursday in Asia above US$109 a barrel as investors waited for a weekly US crude inventory report for evidence that slowing economic growth has cut demand.

Light, sweet crude for October delivery was up 19 cents to $109.54 a barrel in electronic trading on the New York Mercantile Exchange midday in Singapore. The contract overnight fell 36 cents to settle at $109.35.

The US Energy Department's Energy Information Administration is scheduled to release its report on US oil stocks for the week ended Aug. 29 later in the day. The petroleum supply report was expected to show that oil stocks rose by 500,000 barrels, according to the average of analysts' estimates in a survey by energy information provider Platts.

The Platts survey also showed that analysts projected gasoline inventories fell 1.8 million barrels and distillates went up 1.1 million barrels during last week.

"I expect the US numbers to show oil demand is weakening," said Tetsu Emori, commodity markets fund manager at ASTMAZ Futures Co. in Tokyo. "The impact from Gustav will be seen in next week's numbers."

Energy output in the Gulf of Mexico began to slowly come back online after the passage of Hurricane Gustav. Some oil companies in the western Gulf whose equipment wasn't in the path of the storm began ramping up operations on Wednesday.

However, about 96 percent of oil production in the Gulf and about 92 percent of natural gas output remained shut down on Wednesday, according to the US Minerals Management Service, as energy firms assessed platforms, rigs and pipelines and worked to redeploy evacuated workers. The Gulf area is home to a quarter of US oil production and 40 percent of refining capacity.

Crude has dropped about $38, or 26 percent, since surging to a record $147.27 a barrel on July 11, as a U S economic slowdown spreads overseas and curbs demand for petroleum products. "Consuming countries like the U S and Japan are facing economic problems," Emori said. "I think we're heading toward US$100 a barrel and if we break that, to between US$88 and US$95." Weighing on oil has been a stronger dollar versus the euro.

A rising dollar encourages investors who bought oil as a hedge against inflation to sell. The euro was steady on Thursday at 1.4516 against the dollar while the dollar was little changed at 108.01 yen. In other Nymex trading, heating oil futures fell 0.45 cent to $3.0743 a gallon, while gasoline prices rose 0.03 cent to $2.7671 a gallon. Natural gas for October delivery gained 1.2 cents to $7.276 per 1,000 cubic feet.

In London, October Brent crude rose 28 cents to $108.34 a barrel on the ICE Futures exchang