Oil Prices Dip

VIENNA, Austria (AP) _ Oil prices dipped Friday, paring gains a day after an unexpected decline in U.S. crude oil inventories pushed crude futures back above $83 a barrel. <br/><br/>Light, sweet crude

Friday, October 12th 2007, 8:08 am

By: News On 6

VIENNA, Austria (AP) _ Oil prices dipped Friday, paring gains a day after an unexpected decline in U.S. crude oil inventories pushed crude futures back above $83 a barrel.

Light, sweet crude for November delivery fell 33 cents to $82.75 a barrel by midday in Europe in electronic trading on the New York Mercantile Exchange, as markets moved into the correction mode. The contract had jumped $1.78 to settle at $83.08 a barrel Thursday.

Prices were still supported by an International Energy Agency report concluding that oil inventories held by the world's largest industrialized countries have fallen below a five-year average, and by concerns that clashes between Turkish forces and Kurdish rebels could affect Iraqi oil supplies.

November Brent crude fell 8 cents to $80.07 a barrel on the ICE Futures exchange in London after settling Thursday at a new record of $83.08 a barrel.

The weekly inventory report from the U.S. Energy Department's Energy Information Administration said crude supplies fell 1.7 million barrels in the week ended Oct. 5. Analysts surveyed by Dow Jones Newswires on average had expected oil inventories to rise 1 million barrels.

While the report also said refinery activity and supplies of gasoline rose unexpectedly last week, traders focused on the oil inventory number, analysts said.

``The bullish news of the day was an unexpected decline in U.S. (crude) inventories,'' said Vienna's PVM Oil Associates.

Inventories of gasoline rose 1.7 million barrels last week, countering analyst expectations that they would fall 300,000 barrels. Distillate inventories, which include heating oil and diesel fuel, fell 600,000 barrels, in line with expectations.

Despite the increases, supplies of gasoline and heating oil remain low, analysts said.

Demand for gasoline rose last week by about 80,000 barrels, the EIA said, a sign that warm weather may be extending the U.S. driving season. And low heating oil inventories may be a concern despite forecasts for a warmer-than-normal U.S. winter.

Heating oil and gasoline futures fell just over a penny to $2.2370 and $2.0548 a gallon (3.8 liters.) Natural gas futures dropped 0.6 cent to $6.870 per 1,000 cubic feet.

Some analysts also saw the EIA report as validation of the earlier International Energy Agency report, which concluded that crude inventories held by the 30 nations of the Organization for Economic Cooperation and Development fell by 21 million barrels in August to 2.66 billion barrels, 70.4 million barrels lower than last year.

The IEA left unchanged its estimate of world oil demand growth for this year and next at 1.5 percent and 2.4 percent respectively.

The EIA said refinery activity rose by 0.3 percentage point to 87.8 percent of capacity last week. Analysts expected a 0.1 percentage point decline.