Oil steadies below $69, post-summer lull weighs

TOKYO, Sep 6 (Reuters) Oil steadied at below a barrel on Wednesday, hovering near its lowest in three and a half months as dealers feared oil stocks may quickly build up now that the northern hemisphere summer season has ended.

An unexpectedly calm hurricane season this year and the perception of a reduced risk to Iran's oil exports contributed to the downturn, helping knock about off U.S. futures since their all-time high touched in mid-July.

U.S. light crude edged 8 cents lower to .52 a barrel, having fallen as far as .77 a barrel earlier this week, its lowest since May 22. London Brent crude was 12 cents lower at .97.

While dealers remain on alert for possible sanctions against Iran and a new potential hurricane brewing in the distant Atlantic, external risks have largely been set aside this week as dealers refocus on global supply and demand balances.

''Fundamentals for gasoline and products especially look bearish now that the peak gasoline demand has passed and before the heating demand comes in,'' said Ken Hasegawa, the manager at Japan's largest commodities futures broker Himawari CX. ''And we have seen fewer hurricanes than expected.'' In the United States, the end of the summer driving season on Monday heralded the start of the weaker autumn demand period and a gradual shift in traders' focus to the winter.

Weekly U.S. data is expected to show a 1.2 million-barrel build in distillate stocks last week, but a 400,000-barrel decline in gasoline stocks, a preliminary Reuters poll found.

Crude stocks were seen down 1.4 million barrels.

The U.S. government will release weekly oil data on Thursday, a day later than usual because of Monday's Labour Day holiday.

Japanese data on Wednesday showed stocks of winter fuel kerosene rising to unusually high seasonal levels as refiners stock up early in case of a repeat of last winter, the coldest in two decades. Inventories are 21 percent higher than a year ago.

Faced with mounting inventories, lacklustre autumn demand and a global glut of fuel oil supplies, some refiners in Asia were cutting back production to minimise losses on heavier products, another signal of an oversupplied market, traders said.

Japan's top refiner Nippon Oil Corp. said on Wednesday it would cut output by about 23,000 barrels per day (bpd) this month versus its previous plan after a domestic fuel-oil fired power plant broke down. South Korea's GS Caltex Corp. has cut its planned runs by 20,000 bpd, an industry source said.

IRAN FOCUS Traders will keep track on talks between Iran and European Union negotiators tentatively set for later on Wednesday.

However, analysts said the fact that diplomatic efforts were still underway after the U.N.'s Aug. 31 deadline for Tehran to halt uranium enrichment had softened sentiment on the row.

''The oil community appears to have reached a certain degree of comfort over the developments of the Iranian nuclear dispute,'' Barclays Capital said in its daily research note.

The sixth tropical storm of this year, Florence, formed in the distant Atlantic on Tuesday, although several forecasters have lately downgraded their assessment of hurricane risks this year, despite fears of a repeat of 2005's devastation.

The swirling mass of thunderstorms could end up as a hurricane north of Caribbean islands by Friday, but based on its current path did not appear to pose any threat to the U.S.

Gulf of Mexico, the U.S. National Hurricane Center said.

REUTERS CS DS1403