(Updating with full report)
LONDON (Thomson Financial) - Oil steadied as traders paused for breath after betting crude near record levels yesterday, and as Total announced it has lifted force majeure on exports from its oil platform in Angola.
Prices rallied yesterday after Total said a problem with a generator at its its 220,000 bpd Dalia oilfield in Angola had shut in around 50 pct of output at the field.
The news added to traders' concerns over tightening global supply of both crude oil and products, especially in the US where gasoline stockpiles remain depressed amid the peak demand summer season.
At 10.32 am, London's benchmark Brent crude contracts for September delivery were up 7 cents at 77.74 usd per barrel.
Meanwhile, New York crude contracts for August delivery, which expire later today, were down 2 cents at 75.90 usd per barrel, having hit a fresh 11 month high of 76 usd in intraday trades yesterday.
Prices have approached record levels in recent weeks, with the August Brent contract striking 78.40 dollars on Monday, close to a historic high of 78.65 reached last August.
But the rally has not been driven by the such solid fundamentals as were seen when that record was reached, analysts say.
'Last year's run to the record included an expanded geopolitical risk premium, triggered by Israel's incursion into southern Lebanon to oppose Hezbollah,' said Tim Evans, an analyst at Citigroup.
'This year, while there are certainly some ongoing tensions regarding Iran and additional issues such as conditions in Iraq and militant operations versus oil producers in Nigeria, we can't honestly say a larger premium than a year ago is warranted,' he said.
The oil complex in the US has been boosted by ongoing tightness in gasoline stocks, which are seasonally low and dipped a further 2.3 mln barrels this week, despite expectations for a rise.
Existing crude stockpiles in the US remain comfortable, however, at 351.2 mln barrels as of July 13, up 5.1 pct on a year ago.
The ongoing buoyancy of US crude stocks has led to scepticism in some quarters over the extent of the supply shortfall predicted by bodies such as the International Energy Agency.
'In our view, the oil market is highly overheated at present, irrespective of some news that has favoured prices. The actual shortage is being overestimated by market players,' said analysts at Commerzbank.
But while fundamentally analysts are sceptical the rally is justified, enough speculative buyers have weighed into the market in expectation of a rally to record highs to keep prices elevated, they say.
'It could take quite some time for (prices) to drop back to what would be a fundamentally justified level, as speculative interest has been rekindled,' Commerzbank said.
Meanwhile overall sentiment towards the oil complex is still erring on the bullish side. The IEA has said demand is set to rise strongly, while OPEC has steadfastly refused to raise its crude output in the face of rising oil prices.
OPEC oil exports in the four weeks to August 4 are seen falling 240,000 bpd from the previous month, according to press reports.
Kevin Norrish, an analyst at Barclays Capital, said while the price rally over the last few days was probably a bit overdone, it is difficult to see why prices shouldn't close strongly today.
'We've had the IEA making some fairly significant noises about the need for increased OPEC production so there's been a swift turnaround in attitude from one where people thought crude was well supplied to one where, even though inventories are high, expectations are that they will tighten and fall,' he said. maytaal.angel@thomson.com har/gp COPYRIGHT Copyright AFX News Limited 2007. All rights reserved. The copying, republication or redistribution of AFX News Content, including by framing or similar means, is expressly prohibited without the prior written consent of AFX News.