Array

SYDNEY, May 25 (Reuters) Oil prices edged further below $70 on Thursday after sliding on solid gains in U.S. gasoline inventories, softness across commodities sectors and signs of progress in the stand-off over Iran's nuclear ambitions.

U.S. crude was 12 cents down at $69.74 a barrel by 0130 GMT, after losing $1.90 or 2.7 percent on Wednesday. London Brent crude fell 18 cents to $69.04.

''The strong build in gasoline stocks revealed yesterday certainly nudges some of the bigger issues out of the way,'' said Justin Smirk, senior economist at Westpac in Sydney. ''Before the U.S. summer, there is always a cyclical focus on stock levels.'' U.S. gasoline stocks rose by 2.1 million barrels last week, well ahead of a 1.2 million forecast as refineries delivered increased output ahead of the Memorial Day holiday on May 29, the traditional launch of the U.S. summer driving season.

''Commodities are a bigger issue, with the market wondering if this is the start of a big correction,'' said Westpac's Smirk. ''Our view is that until something big happens they will stay around these levels but we can expect high levels of volatility.'' Oil slipped in tandem with most commodities. Copper fell more than 6 percent to reverse much of the previous session's recovery and gold fell over 5 percent to its lowest level in a month as investors continued to worry high prices would hurt demand.

Many commodity classes have recently traded around record highs, prompting concerns about inflation, higher interest rates and a slower global economy. Oil is well below April's record $75.35, but is still up 14 percent from the start of the year. ''Anything that takes some of the tension out of the situation with Iran will also weigh on oil prices,'' said Westpac's Smirk. ''It's a situation which has been supporting higher prices for some time now.'' World powers meeting in London on Wednesday said they had made progress on a package of proposed threats and incentives to stop OPEC member Iran's nuclear program, which some believe is for weapons despite Tehran's insistence it wants nuclear power.

A spokesman for the U.S. State Department said that Iran, the world's fourth-biggest oil exporter, had sought bilateral talks with the United States but that Washington would stick to a multilateral approach.

Longer-dated crude forward contracts remain above $70 as expectations for a rough summer hurricane season underpin prices.

The U.S. government has said the U.S. Gulf, still recovering from 2005, could see up to 10 hurricanes this year.

REUTERS