Oil hits five-mth low on ample supply, mild season

TOKYO, Sep 7 (Reuters) Oil prices fell to their lowest in five months before steadying on Thursday, pausing from a three-day decline as dealers zeroed in on healthy U.S. inventories heading into the mild autumn demand season.

U.S. light crude for October delivery stood a cent down at .49 a barrel by 0405 GMT, after hitting a low of .41, the cheapest price since April 10 when it touched .40.

London Brent crude edged up 3 cents at .96 a barrel.

Oil prices have lost about from record-highs of above struck in July for U.S. crude and in August for Brent.

''There's no bullish news -- the ceasefire in Lebanon is lasting, no hurricanes are hitting the oil facilities, no Nigerian sabotage attacks have happened recently,'' said Tony Nunan at Mitsubishi Corp.'s risk management unit in Tokyo. '' ''Gasoline demand was strong during summer but it was well met despite all the fuss about gasoline additive spec changes and so on, and now traders ended up with seeing high inventories.'' The market focused on the weekly U.S. Energy Information Administration (EIA) oil data due on Thursday, the first release of such figures near the end of peak-summer driving demand, in which a Reuters poll forecast a 1.3 million-barrel drop in crude supply in the week to Sept. 4.

But the inventories are already around 6 percent higher than a year ago and the surplus is likely to widen due to the lack of hurricanes in the Gulf of Mexico.

The analysts predicted a 1.3 million-barrel build in inventories of distillates, including heating oil, jet fuel and diesel.

Gasoline stocks were seen down 800,000 barrels -- smaller than the 4.3 million-barrel drop in the corresponding week in 2005 -- as the traditional driving season in the United States, the world's top oil consumer, ended on the Sept. 4 Labor Day holiday.

SLOW HURRICANE SEASON The mild Atlantic hurricane season so far this year has also swayed down oil prices, traders said.

Tropical Storm Florence slowly strengthened in the open Atlantic on Wednesday and could grow into a hurricane, U.S. forecasters said on Wednesday. But computer tracking models projected the storm would spare the U.S. Gulf Coast and its oil facilities.

''Demand is on a seasonal downswing and inventories are comfortable,'' said Tobin Gorey, a commodity strategist at Commonwealth Bank of Australia. ''Florence is no threat to Gulf of Mexico oil production on the trajectory.'' Oil traders are still wary over the risk of supply disruptions from Iran, the world's fourth-largest exporter, as diplomatic efforts to avert immediate sanctions against Tehran continue.

''Iran will continue to be one of the concerns for the oil market. But talks will go on and the market does not expect the geopolitical pictures would change anytime soon,'' Mitsubishi's Nunan said.

Senior diplomats from six world powers meet in the German capital on Thursday to discuss what to do with Iran after it ignored a U.N.

Security Council deadline to freeze its nuclear enrichment programme.

The U.S. expects the Security Council to overcome Russian and Chinese misgivings and approve sanctions on Iran, senior U.S.

officials said on Wednesday. Despite Washington's confidence, it is by no means certain that other major powers will agree to impose sanctions, with Russia and China both uneasy with the use of sanctions in general and reluctant to harm trade with Iran.

REUTERS PKS GC1102