Oil falls toward $ 80 as US Gulf production rises

SINGAPORE, Sept 25 (Reuters) Oil extended losses by half a dollar on Tuesday, as dealers took more profits from last week's record high after U.S. Gulf oil infrastructure was not damaged by a mild storm, allowing producers to resume pumping.

U.S. crude for November fell 48 cents to .47 a barrel by 0535 GMT, adding to Monday's 67-cent loss to bring it nearly below the record .90 set by the October-month contract last Thursday.

London Brent crude shed 46 cents to .45 a barrel.

U.S. crude oil production in the Gulf of Mexico rose to 80.7 percent of capacity on Monday, up from 37 percent on Friday, the U.S. Minerals Management Service said, as oil companies redeployed workers to offshore rigs.

''What we saw was a risk premium embedded into crude prices, but now that the storm passed without damaging production facilities we see prices coming down,'' said Gerard Burg, Minerals and Energy Economist at National Australia Bank.

''Now that we are out of the key demand season, the end of the driving season in the U.S., we are now seeing less demand in the product sector, refineries are heading into maintenance before ramping up production of heating oil,'' Burg said.

U.S. refiners probably slowed imports of crude last week, causing inventories to fall by about 2 million barrels, their fifth-straight decline, a poll of analysts showed. S] Stocks of distillates, including heating oil, were expected to have risen by 1.3 million barrels while gasoline inventories were seen unchanged, the preliminary poll found.

Refiners could have curbed imports for economic reasons too, the poll showed, as prices for future crude deliveries are cheaper than the currently traded month, making it good business sense not to store more feedstock than needed.

While some analysts say crude could be ready for a correction, they warn that speculative cash or tightening supplies could spur prices higher again.

''Overall this just looks like a normal correction, the market is taking a well-deserved pause, and a little bit of profit taking by some of the funds,'' said Jim Ritterbusch, President of Ritterbusch&Associates.

Rising investment flows are supporting prices, with speculators' increasing net long positions on the New York Mercantile Exchange in the week to Sept. 18 in a bet prices are heading higher.

Traders began casting a wary eye at tropical cyclones that could form in the southwestern Gulf of Mexico, but three out of four weather models predict the system will steer clear of U.S.

oil and gas producing facilities.

Worries over supply in Nigeria also continued, as The Movement for the Emancipation of the Niger Delta (MEND) threatened fresh attacks on oil facilities and abductions of foreign workers.

REUTERS SBA DS1146