Crude oil prices rise
Crude oil futures prices rose Wednesday amid concerns about tight heating oil supplies and fears that OPEC could rein in output when it meets later this week. Light sweet crude for January delivery was up 48 cents to $41.94 per barrel on the New York Mercantile Exchange. In London, Brent crude futures climbed 42 cents to $38.69 per barrel. Despite a sharp pullback recently, oil prices are roughly 30 percent higher than a year ago.
While the Energy Department reported rising U.S. inventories of crude oil and distillate fuel, the supply of distillate, which includes heating oil, remains 12 percent lower than a year ago and that leaves the country vulnerable in the event of a colder-than-normal winter.
Heating oil futures jumped 3.34 cents to $1.257 per gallon on Nymex, where they are trading roughly 40 percent above year ago levels.
Aaron Kildow, a broker with Prudential Financial Inc. in New York, said Wednesday’s rise in energy prices had a lot to do with the market reversing course from Tuesday, when prices fell sharply in anticipation of large week-to-week increases in crude oil and distillate fuel. “We were looking for much bigger builds,” Kildow said. The Energy Department reported that the nation’s commercial inventory of crude oil increased last week by 600,000 barrels to 293.3 million barrels, or 5 percent higher than a year ago. The agency said the supply of distillate fuel, which includes heating oil and diesel, grew by 1.4 million barrels to 119.3 million barrels. There was more than 136 million barrels of distillate fuel at the same time a year ago.
Still, concerns about tight heating oil supplies ahead of winter have eased somewhat in recent weeks due to mild fall weather in the Northern Hemisphere and gradually growing inventories. But with oil prices down sharply from their late October peak above $55 a barrel, the Organization of Petroleum Exporting Countries meets in Cairo on Friday to outline its plans for the first quarter of 2005, and hawks like No. 2 producer Iran have managed to garner support from Venezuela, Libya, Kuwait and Qatar in urging compliance with OPEC’s official quota in a bid to stem the decline.
in prices.
Staking out a conflicting position ahead of the upcoming meeting, the oil minister of production giant Saudi Arabia said Wednesday he was happy with present crude output. Saudi Oil Minister Ali Naimi also said he wasn’t concerned about the U.S. dollar’s weakness against most major currencies, saying fluctuations were normal.
OPEC president Purnomo Yusgiantoro, meantime, said Wednesday a production cut could occur only in the second quarter of 2005.
BNP Paribas Commodity Futures broker Tom Bentz speculated on how the market would react, depending on what OPEC decides:
_ If the cartel keeps output at current levels, the downward price momentum would likely stick, Bentz said.
_ If the cartel adheres more strictly to its official quota, that would keep markets tense and maybe push prices higher.
_ And if OPEC agrees to cut its output quota, “that would be a big surprise,” Bentz said, sending the strongest signal possible to traders that the cartel intends to defend today’s high prices.
OPEC members, excluding Iraq, are pumping out crude at full tilt at about 28 million barrels daily, or 1 million barrels above its official quota. Iraq adds an additional 1.8 million barrels or so.
“While much attention is focused on possible production cuts … the key to the near-term supply picture lies largely with one member – OPEC kingpin Saudi Arabia,” Energyintel’s Tom Wallin said in a research note.
The world’s largest crude producer pumped 9.5 million barrels a day in November, or 700,000 barrels above its quota.
Petroleum prices have been high due to strong global demand, a tight supply cushion and fears of output disruptions in Iraq, Nigeria and Russia. In September, Hurricane Ivan knocked out significant oil production in the Gulf of Mexico, though output is now recovering.
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Associated Press Writers Jane Wardell and Yeoh En-Lai in Singapore contributed to this report.