Oil Prices Drop for 3rd Day

An oil platform seen at Maracaibo lake in Cabimas, Venezuela, in this file photo from Sept. 1, 2005. Venezuela said Friday, Sept. 29, 2006, it will cut oil production by 50,000 barrels a day to try and stem the recent fall in crude prices and President Hugo Chavez said an "appropriate" price for oil was $50 to $60 a barrel. (AP Photo/Ana Maria Otero-File) (Ana Maria Otero - AP)

SINGAPORE -- Oil prices fell for a third day Wednesday after settling overnight at a seven-month low amid signs of growing supplies around the world.

Light sweet crude for November delivery fell 28 cents to $58.40 in midmorning Asian electronic trading on the New York Mercantile Exchange.

Crude oil futures have tumbled about 25 percent in less than two months. They have fallen more than $4 this week, settling at $58.68 a barrel Tuesday, the lowest close since Feb. 16.

"There is certainly a lot of focus on fundamental supply," said Mark Pervan, commodities analyst at Daiwa Securities in Melbourne, Australia. "Supply is ample and the speculative fear of supply disruption has eased."

But he said prices would likely not fall much lower because traders would see the opportunity for speculating.

With economic growth slowing and oil supplies rising, energy markets have become less jittery about geopolitical tensions, such as the diplomatic standoff between Iran and the West over Tehran's nuclear ambitions. For much of the year, fear about potential sanctions against Iran, and possible retaliatory actions by OPEC's No. 2 supplier, had gripped the market.

The conclusion of a mild Atlantic hurricane season has also eased fears of disruptions to Gulf of Mexico oil and natural gas production.

Analysts estimate that worldwide surplus production capacity stands at 2.5 million barrels a day, or 3 percent of daily demand.

The U.S. Department of Energy said last week that U.S. inventories of crude oil stood at 324.8 million barrels, or 5 percent more than last year; inventories of distillate, which includes heating oil, stood at 151.3 million barrels, or 15 percent above year ago levels.

Later Wednesday, the Department of Energy was to release data petroleum inventories for the week through Sept. 29. Analysts predict that crude stocks dropped about 700,000 barrels, but that gasoline stocks rose 1.2 million barrels and distallate stocks rose 1.3 million barrels.

However, recent repeated calls by some OPEC members to cut output could weigh on crude futures.

On Friday, Venezuela said it would reduce oil output by 50,000 barrels a day to try to stem the recent fall in crude prices. Nigeria has said it intends to cut oil exports by 100,000 barrels, an amount the state-owned oil company described as a routine seasonal reduction. Combined, these cuts amount to less than 1 percent of daily global demand.

The cartel's largest producer, Saudi Arabia, has given no indication it is imminently seeking additional reductions in output.

In other Nymex trading, heating oil futures declined by 0l.49 cent to $1.6490 a gallon while gasoline futures were down 0.11 cent to $1.4556 a gallon. Natural gas futures rose 9.7 cents to $5.856 per 1,000 cubic feet.