Oil prices slip as Iraq nearer crude exporting

Oil prices slip as Iraq nearer crude exporting

LONDON (Reuter): Oil prices slipped yesterday as Baghdad took
a step nearer resuming limited crude exports and on further
evidence that a spring surge in U.S. gasoline demand is waning.

Late on Tuesday Iraq gave the United Nations a preliminary
draft of its food procurement and distribution plan, essential
for the resumption of crude exports suspended since late May.

American Petroleum Institute (API) data released late on
Tuesday showed gasoline consumption eased last week ahead of the
July 4 holiday weekend, traditionally seen as the heaviest period
of demand for motor fuels.

World benchmark Brent Blend crude futures for August delivery
on London's International Petroleum Exchange shed 19 cents to
US$18.19 a barrel by 1053 GMT.

"It's partially API-led...but the Iraqi news is also a step in
the right direction," said Peter Gignoux, head of the energy desk
at Smith, Barney in London.

The U.N. coordinator in Baghdad, Staffan de Mistura, told
Reuters the distribution plan required further work before it
could be submitted to U.N. Secretary-General Kofi Annan for
approval, but he gave no indication how long this would take.

Under the terms of the U.N. plan implemented last December,
Baghdad is allowed to sell $2 billion of oil over 180 days to
raise money for humanitarian imports.

The deal was renewed on June 8 but Iraq has suspended exports
pending the completion of improved arrangements for getting food
and medicines to central and southern parts of the country.

Iraqi exports between December and May averaged 660,000
barrels per day (bpd). Oil Minister Amir Muhammad Rasheed said
late last month they would resume at around 730,000-750,000 bpd
once the aid plan is finalized.

"As soon as the aid plan is completed I can't see there will
be further delays in terms of signing new contracts. A lot of
preparations have been made," said a senior trader for a European
oil company which bought Iraqi crude earlier this year and is
keen for more.

Analysts say Iraq's return could push Brent crude back towards
the 13-month low of $17.32 a barrel posted in mid-June as the
extra barrels flow into heavily swollen stocks.

International Energy Agency (IEA) data released on Tuesday
showed strong U.S. gasoline demand in May was already evaporating
in June, a trend which appeared to be continuing into July
according to the API report.

Gasoline stocks fell a modest 137,000 barrels in the week to
July 4, well below analysts' expectations.

With inventories of other products, notably distillates or
heating oil and diesel, soaring far above year-ago levels in both
the U.S. and Western Europe, oil refineries are beginning to feel
the pain of a margin squeeze.

U.S. refinery operating rates fell back last week,
contributing to a 4.70 million barrel build in crude stocks which
are now seven million barrels higher than at the same point last
year.

And worse could come later this summer, analysts said.

"(If) the gasoline season fizzles early, and as a consequence
refiners reduce their crude throughput, the glut will appear in
the crude market faster than in the product markets, maybe even
as soon as early August," said Washington-based Petroleum Finance
Company.