Oil prices slid below $61 (€48) a barrel yesterday on rising winter fuel stocks and waning concern about Iran, but Saudi Arabia, the world's largest exporter, signalled the market may have fallen enough.

US crude was down 71 US cents at $60.95 a barrel after touching $60.60, the lowest since March 21st. The market was close to erasing this year's gains - crude closed 2005 at $61.04. Oil has retreated more than $17 from its July record high of $78.40 in its steepest decline in 15 years.

London Brent was down 77 cents at $61.40 a barrel.

Brimming inventories of US distillates fuel rose more than expected last week, to their highest level since January 1999, the government reported yesterday. Distillates, which include heating oil, rose 4.1 million barrels, compared with forecasts for a rise of 1.9 million barrels.

US fuel inventory levels have bolstered a perception among investors that the world's biggest oil consumer was well prepared to meet winter demand. Stocks are also high in other large consumers, such as Japan and Germany.

"Everything is bearish in this market. Sentiment has completely changed and we are still going lower here as there are no signs that we are bottoming out," said Mark Waggoner, president of Excel Futures in Huntington Beach, California. The price slide has revived discussion about what price level would prompt the Organisation of Petroleum Exporting Countries (Opec) to cut production to stem the fall.

Saudi oil minister Ali al-Naimi on Tuesday described prices as reasonable for the first time since the market scaled record highs. "The oil industry is convinced that this price is reasonable," Mr Naimi told reporters in Riyadh.

"Prices now are rewarding to both producers and consumers and their impact on the global economy is small."

Some Opec ministers have signalled a price of $50-60 a barrel should be sustained, but the cartel has avoided setting a formal target.