Oil in Asia slips in thin trade

Oil in Asia slips in thin trade

SINGAPORE (Reuters): Crude oil prices softened in Asia on
Thursday with the market watching the Organization Of Petroleum
Exporting Countries (OPEC) closely for a supply hike as prices
breached the cartel's target band.

Bearishness also hit the rangebound market due to news the
United Nations (UN) looks prepared to let Iraqi oil exports flow
without gaps in June as an oil-for-food deal expires.

By 0700 GMT, the benchmark July light crude futures on the New
York Mercantile Exchange (NYMEX) was trading at $29.85 a barrel,
10 cents lower from its Wednesday in New York, when the contract
had settled at $29.95 a barrel.

The market was still on tenterhooks due to confusing signals
from the OPEC as oil prices climbed.

The oil cartel had an informal agreement in March under which
it would automatically hike output by 500,000 barrels-per-day
(bpd) if prices for its basket of crudes exceed its target band
of $22-$28 a barrel on a 20-day average.

This 20-day average has been breached for the first time since
March.

According to Reuters calculations using figures from the OPEC
secretariat, the OPEC crude prices average stood at $28.08 a
barrel up to Wednesday.

But OPEC delegates have said on Wednesday that they expected
no binding decision on output, until the group meets again in
Vienna on June 21.

Even OPEC president Ali Rodriguez who had said there would be
no delay on extra output on Tuesday, softened his comments on
Wednesday saying that he would have to discuss the situation
further with OPEC members.

Meanwhile, a key exporter Iraq will likely continue exports
without hitches in June.

Diplomats at the UN office said late on Wednesday that it had
provisionally approved Iraq's request to extend the seventh phase
oil sales volume into the first 17 days of the oil-for-food
programs' eighth phase.

Iraqi exports have been under UN control due to sanctions
imposed after the Gulf War.

More oil supplies were called on in the U.S. as the market
remained thirsty, with its gasoline demand rising amid the peak
summer demand season.

The U.S. Department of Energy (DOE) said on Wednesday in its
weekly oil market report that U.S. inventories of crude for the
week ended June 2 were down 4.0 million barrels to 301.2 million,
while gasoline stocks were at 201.3 million, up 200,000 barrels.

Both inventory levels were some 12 to 13 percent below levels
at the same period last year, DOE data showed.

The DOE also said U.S. gasoline demand and output reached a
record peak in May, at 8.6 million and 8.4 million bpd
respectively. The shortage was made up by imports.