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.