-- Oil prices lower as reports emerge that France is in talks about releasing strategic oil reserves
-- France says it is working on "all fronts" to achieve a fall in prices in the short term
-- Total gas leak at Elgin field has minimal effect on Brent time spreads
-- Later Wednesday, investors look to data on oil inventories from U.S. Department of Energy
By Jenny Gross
Of DOW JONES NEWSWIRES
LONDON (Dow Jones)--Oil prices traded lower Wednesday as France said it was in talks with the International Energy Agency on whether to release strategic oil reserves.
At 1046 GMT, the May Brent contract on London's ICE futures exchange was down $1.14, or 0.9%, at $124.40 a barrel. The May contract on the New York Mercantile Exchange was trading down 99 cents, or 0.9%, at $106.34 a barrel.
"If this is going to take place, it's going to be a question of weeks, rather than days," said Tamas Varga, an analyst at PVM. "But certainly it is not bullish when countries are talking about releasing oil from strategic reserves."
French government spokeswoman Valerie Pecresse said Wednesday: "France is alongside the U.S. and the U.K. in the consultation with the IEA, which could allow reserves to be used to combat speculation on fuel markets."
She also said France is "working on convincing oil producing companies to put more resources on the market to bring prices down. France is working on all fronts [...] to achieve a fall in prices in the short term," she said.
Meanwhile, a leak at Total SA's (TOT) Elgin gas field in the North Sea, which started Sunday, has created a sheen of gas condensate on the water six nautical miles wide. Total is still working to cap the leak, it said in a statement Tuesday.
However, the gas leak doesn't look like it will have as big an effect on Brent crude oil spreads as traders initially thought, Varga said.
"We saw it yesterday supporting the Brent structure, but then it turns out only 60,000 barrels a day of Forties production is affected. Therefore, maybe the market thought it's not as bullish for the Brent structure as we thought originally it would be."
Also, fighting between Sudan and South Sudan in border territories has intensified Tuesday, raising serious doubts about the two neighbors' ability to find a speedy resolution to an oil dispute that has led South Sudan to shut in roughly 350,000 barrels a day of oil production.
Later Wednesday, market participants will look to weekly data due from the U.S. Department of Energy on crude oil inventories from last week. Weighing on prices was the 3.6 million barrel increase in U.S. crude oil stocks, as reported by the American Petroleum Institute Tuesday. A confirmation of these levels by the U.S. Department of Energy could send oil prices even lower, analysts said.
At 1046 GMT, the ICE's gasoil contract for April delivery was down $1.50, or 0.1%, at $1,024.25 per metric ton, while Nymex gasoline for April delivery was down 378 points, or 1.1%, at $3.3678 per gallon.
-By Jenny Gross, Dow Jones Newswires; 4420-7842-9239; jenny.gross@dowjones.com
