Oil prices drop on easing concerns about storm approaching Persian Gulf

Oil prices retreated Tuesday amid easing concerns about a cyclone approaching the Persian Gulf and on expectations that a midweek report would show that U.S. gasoline stockpiles rose last week.

Light, sweet crude for July delivery fell 19 cents to US$66.02 a barrel in Asian electronic trading on the New York Mercantile Exchange midmorning in Singapore.

The contract rose US$1.13 to settle at US$66.21 a barrel Monday as an Indian Ocean storm expected to hit Oman by the middle of the week, threatened to disrupt shipping there and weighed heavily on the market.

To reassure the oil markets, Saudi Arabia's government also issued a statement Monday saying the cyclone would have no "direct effect on the central and eastern parts of the kingdom."

The storm is expected to lose power, but coupled with the remnants of Tropical Storm Barry, which lashed the Northeast United States Monday morning, analysts said it has served as a reminder for traders that the hurricane season has arrived.

"(Prices) came back down in Asia now but because it's gone up a long way and people are pausing for thought here," said Tobin Gorey, a commodity strategist with Commonwealth Bank of Australia in Sydney.

Traders also were awaiting Wednesday's release of U.S. government fuel supply report, which was expected to show that gasoline stockpiles rose last week.

According to a Dow Jones Newswires survey of analysts, gasoline stocks are expected to rise by 1.5 million barrels, distillate stocks by 800,000 barrels and crude inventories by 120,000 barrels. Refinery utilization expected to rise by 0.6 percentage point.

Also easing crude futures was news that a Nigerian opposition group had declared a one-month cease-fire, which could offer newly inaugurated Nigerian President Umaru Yar'Adua an opening to solve the crisis that has roiled Africa's oil giant, a leading exporter of crude to the United States.

In other Nymex trading, heating oil futures lost a tad to US$1.9640 a gallon (3.8 liters) while natural gas prices gained 0.2 cent to US$8.193 per 1,000 feet.