Oil drops as BP announces restoration

As energy giant BP said that its huge oil field in Prudhoe Bay, Alaska would be brought back to full production by the end of October, Oil prices hit their lowest level in five months. Also, a rise in the supply of gasoline and diesel in the U.S. led to a drop in the crude oil prices.

The refineries processed more oil, than the U.S. government had said and so the supply of diesel advanced twice as much as forecast.

BP Plc said it will restore full production at Prudhoe Bay in Alaska, the biggest U.S. oil field, as soon as work to bypass a corroded pipeline is done. The bay which is partially shut since August due to pipeline corrosion could return to full capacity above 400,000 barrels per day.

“The Prudhoe Bay oil field in Alaska is ready for full output,'' said Hiroyuki Kikukawa, deputy general manager of research at brokerage Nihon Unicom Corp. in Tokyo. “For next week, the price is likely to drop.''

BP's decision to shut down North America's biggest field sent oil prices soaring above $77 a month ago, but prices have since wilted as the supply-fears have been eased by a sluggish hurricane season and healthy global oil inventory levels.

"This (news on BP) is just one more bearish headline on top of another," said Phil Flynn of Alaron Trading. "The partial shutdown at Prudhoe Bay inspired a scramble for imports and now production there is coming back, just as we have ended the summer driving season."

US light crude for October delivery settled down 18 cents overnight to $67.32 a barrel after dropping down to $ 66.76, the lowest since April 7. London Brent crude slipped 40 cents to $US 66.53.