Oil Trades Near 7-Week Low as OPEC Output Climbs, Demand Drops

By Angela Macdonald-Smith

July 28 (Bloomberg) -- Crude oil traded near a seven-week low in New York after falling July 25 on signs the Organization of Petroleum Exporting Countries is bolstering output while fuel use in the U.S. and Asia is dropping.

OPEC increased output by 200,000 barrels a day in July, PetroLogistics Ltd. said last week. Oil prices have dropped from a record on speculation that the risk of a conflict between Iran and the U.S. has diminished and because the dollar has appreciated, the group's President Chakib Khelil said July 26.

``The news events have lately all been for weaker prices,'' said Mark Pervan, a senior commodity strategist at Australia & New Zealand Banking Group Ltd. in Melbourne. ``There's certainly some heat coming out of the market. You wouldn't discount another event coming out of Nigeria or Iran this week, so I don't think the price is going to fall that far.''

Crude oil for September delivery traded at $123.23 a barrel, down 3 cents, in after-hours electronic trading on the New York Mercantile Exchange at 7:13 a.m. Singapore time. On July 25 the contract fell $2.23, or 1.8 percent, to $123.26, the lowest settlement price since June 4. Prices fell 4.8 percent last week.

Oil has slipped about $24 a barrel from the $147.27 record on July 11. Tensions over Iran's nuclear work had helped to push prices to an all-time high amid concerns that Israel or the U.S. might resort to military action to halt the nation's atomic drive, should diplomacy fail.

OPEC Output

Gunmen in Nigeria, Africa's biggest oil producer, have freed eight foreigners during a raid on a ship in the oil-rich Niger Delta, a military spokesman said yesterday. Seven other oil workers that were abducted in separate incidents on July 25 are still being held, he said.

Attacks by Nigerian militant groups have halted more than 20 percent of the west African country's production since 2006.

OPEC will provide 32.9 million barrels a day of oil this month, up 200,000 barrels from June, PetroLogistics founder Conrad Gerber said July 25. The 13-member group produces more than 40 percent of the world's oil.

Saudi Arabia, in response to calls from consuming nations, said it would produce an extra 300,000 barrels a day in June and a further 200,000 barrels a day in July to curb prices.

Crude oil may fall this week as Saudi Arabia increases output and slowing economic growth curbs consumption, a Bloomberg News survey found. Thirteen of 28 analysts surveyed, or 46 percent, said prices will fall through Aug. 1. Five of the respondents, or 18 percent, said oil will rise and 10 forecast little change.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net