Oil slides on inventory revision

Industry group IEA says major consumers are more comfortably supplied than previously thought.

June 13, 2003: 1:56 PM EDT

NEW YORK (CNN/Money - Reuters) - Oil prices fell more than 5 percent Friday after the International Energy Agency said major consumers were more comfortably supplied than it previously thought.

U.S. light crude for August delivery was down $1.15 at $29.15 a barrel Friday afternoon, after trading as low as $28.75, extending sharp losses on Thursday and pulling prices away from recent 12-week highs above $32.

London Brent crude for August delivery fell 97 cents to $26.25 a barrel, after trading as low as $26.03 Friday.

Prices fell as the Paris-based IEA, energy adviser to 26 industrialized nations, said it had undershot by 79 million barrels in its previous estimate of oil stock levels.

The agency's revised estimate put oil stocks in the industrialized world at 2.439 billion barrels at the end of April.

"Stocks are still below normal and can absorb some surplus in the third quarter, but I think we have entered a stage when more supply is coming on the market and will impact prices," said Geoff Pyne, oil market consultant to Sempra Energy Trading.

The IEA said the revision did not change its view that global markets were tight. Stocks are still 157 million barrels, or 6.5 percent, below 2002.

"The market is obviously better supplied than we thought as little as two weeks ago, but stocks are still low and fundamentals are still tight, so we need to build more stocks," said Klaus Rehaag, editor of the IEA monthly oil market report.

"The increase in crude stocks may, however, signal some relief for an otherwise tighter heating oil situation later this year," he added.

Oil stocks have been drawn down this year by a harsh northern winter and supply disruptions from a strike in Venezuela, ethnic strife in Nigeria and the war in Iraq.

Iraq on Thursday sold its first oil since the U.S.-led invasion nearly three months ago, but looting and sabotage at oil facilities are expected to keep Iraq's exports well below prewar levels for several months.

The delays in Iraq's postwar export resumption enabled the OPEC producer cartel, which set a $22-$28 target range for its basket of crude oil, to postpone fresh supply cuts at Wednesday's meeting in Qatar.