Oil downturn deepens as supplies swell

Oil yesterday extended a price slide that has cut 12 per cent from record highs in two weeks as growing signs of ample supply eases concerns over fuel stocks for the northern winter.

US light crude fell 44 cents to $48.65 a barrel, nearly $7 below the all-time peak at $55.67 struck on October 25. London Brent was down even more sharply, falling a dollar to a six-week low of $44.92 a barrel.

Oil's 50 per cent rally this year has spurred the Opec oil cartel to produce at the highest level in 25 years, gradually helping to rebuild low fuel inventories, and weaken prices on physical spot markets.

Oil's slide in the last two weeks has seen hedge funds cut their net long positions to the lowest level in a year in a switch to other financial markets, particularly equities.

The US Energy Information Administration's weekly report today is expected to show a seventh straight rise in US crude inventories, and a small increase in low distillate stocks, which include heating oil.

Output in the US Gulf of Mexico, which is still recovering from damage from Hurricane Ivan in September, have hindered the winter stockbuild.

As of Monday, Gulf of Mexico crude production remained at 87.5 percent of the normal rate of 1.7 million barrels per day.

Tight heating fuel supplies in leading consumers the United States, Japan and Germany, means a cold northern winter could send prices shooting back up, analysts say.