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Oil down to around US$61 ahead of OPEC meeting

OIL prices fell to around US$61 a barrel yesterday as investors eyed an OPEC meeting this week and weighed evidence of a global economic recovery.

Trading was light because U.S. markets are closed yesterday for Memorial Day.

Benchmark crude for July delivery was down 62 cents to US$61.05 a barrel by mid-afternoon in Europe in electronic trading on the New York Mercantile Exchange. On Friday, the contract rose 62 cents to settle at US$61.67.

In London, Brent prices fell 72 cents to US$60.06 a barrel on the ICE Futures exchange.

Oil has rallied on investor optimism that the worst of the global economic downturn is over. Traders will get fresh data to mull this week when the U.S. releases a consumer confidence index for May and reports on sales of existing and new homes last month.

In Asia, there are signs that the drop in exports has bottomed, although the outlook remains murky.

Investors will also be looking for evidence of increased demand as the U.S. summer driving season begins.

"The US$60 level implies that we're going to have a V-shaped recovery in the global economy, and there's really very little evidence of that," said Victor Shum, an energy analyst with consultancy Purvin & Gertz in Singapore.

"In the near-term, the rhetoric about post-Memorial Day driving activity may provide support, but eventually fundamentals will re-exert themselves in the market," he said.

The Organization of Petroleum Exporting Countries meets on Wednesday and Thursday in Vienna to discuss a possible production cut that would add to 4.2 million barrels a day of output reductions the cartel has announced since September.

OPEC leaders this year have said they want the price of crude at US$70 a barrel, and most analysts say the recent jump to above US$60 from below US$35 in March will keep the group from any further production cuts.

"We don't expect any changes in output targets," Shum said. "The price is too high to cut."

Oil prices gained some support from developments in Nigeria, where militants said yesterday they had destroyed major pipelines operated by Chevron Corp. in the country's oil-rich southern delta region.

The Movement for the Emancipation of the Niger Delta also said it freed three Filipino oil workers taken hostage earlier this month.

The militants say they are fighting to force the federal government to send more of the oil-industry funds it controls to the Niger Delta, which remains deeply impoverished despite five decades of oil production.

In other Nymex trading, gasoline for June delivery fell 1.65 cents to US$1.8243 a gallon and heating oil dropped 1.46 cents to US$1.5234 a gallon. Natural gas for June delivery slid 2.3 cents to US$3.492 per 1,000 cubic feet.


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