Oil halts drop near US$60 as US supplies seen falling third week

[MELBOURNE] Oil halted a four-day decline to trade near US$60 a barrel before US government data forecast to show crude stockpiles slid for a third week.

Futures were little changed in New York after dropping 2.2 per cent in the past four trading sessions. Inventories probably fell by 2 million barrels through May 15, according to a Bloomberg survey before an Energy Information Administration report Wednesday. Saudi Arabia shipped more oil in March than in any month since November 2005 as the world's biggest crude exporter battled for market share.

Oil's recovery from a six-year low has faltered near US$60 a barrel amid speculation rising prices will encourage production and sustain a supply glut. The Organisation of Petroleum Exporting Countries has resisted calls to reduce its output, exacerbating the oversupply. The group next meets on June 5 in Vienna.

"There is still ample supply for the demand that we're seeing," David Lennox, a resource analyst at Fat Prophets in Sydney, said by phone. "We've probably seen the bottom but it could still be volatile on the downside until we do get real production cuts."

West Texas Intermediate for July delivery rose 11 cents to US$60.35 a barrel in electronic trading on the New York Mercantile Exchange at 10:45 am Sydney time. June futures, which expire Tuesday, climbed 16 cents to US$59.59. The volume of all futures traded was about 72 per cent below the 100-day average. Front- month prices are up 12 per cent this year.

Brent for July settlement climbed 8 cents to $66.35 a barrel on the London-based ICE Futures Europe exchange. It decreased 54 cents, or 0.8 per cent, to US$66.27 on Monday. The European benchmark crude was at a premium of US$5.97 to WTI for the same month.

BLOOMBERG