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Oil slips further below $68 before US stock data

LONDON - Oil’s slide continued into its fifth day on Thursday with prices drifting further below $68 ahead of US data that is expected to show a recovery in gasoline stocks in the world’s top consumer.

London Brent crude oil LCOc1, currently a better indicator of the global market than US oil, was down 17e cents at $67.67 a barrel by 1239 GMT. Since May 25, when prices turned tail, Brent has shed more than $3.

US crude CLc1 was down 30 cents at $63.19.

“Price action in both Brent and WTI suggest further downside selling to come,” said Barclays Capital technical analysts, who study price charts to determine future direction.

They noted particular weakness in US gasoline futures, reflecting increased supplies for peak summer demand. Unexpected refinery shutdowns and low gasoline stocks in the United States helped push Brent to a nine-month high of $71.80 on May 24.

US gasoline stocks are expected to have risen by 1.3 million barrels in the week preceding Monday’s Memorial Day holiday, the start of the US driving season, according to a Reuters poll ahead of the data. [EIA/S]

That would be the fourth build in a row, but would still leave stocks far shy of their norms for this time of year.

Crude oil stocks are expected to have risen by 700,000 barrels and distillate inventories by the same margin.

Oil investors kept a wary eye on Chinese equity markets after a 6.5 percent fall on Wednesday, although analysts have said the volatility is unlikely to have an immediate impact on economic growth or oil demand.

The Shanghai index .SSEC fell sharply again in early trade on Thursday but stood 1.4 percent higher by late afternoon.

Nigeria, the world’s eighth biggest oil exporter, will also remain a focus of concern. Attacks on oil installations have continued into the first days of new president Umaru Yar’Adua’s tenure which began on Tuesday.

Adding to supply risks, June marks the start of the Atlantic hurricane season that poses a threat to Gulf of Mexico oil production and refining operations. The US government’s top climate agency expects up to 10 Atlantic basin hurricanes, of which three to five could be major ones.

Tropical Storm Barbara may reach hurricane strength within four days, the US National Hurricane Center said.

“While it will make a nice headline it is on the wrong side of Mexico to cause any threat to oil installations,” said Olivier Jakob, an analyst at Swiss-based Petromatrix.

Government and industry officials said on Wednesday the US energy industry is better prepared after learning lessons from hurricanes Katrina and Rita in 2005.