Oil futures rise
VIENNA, Austria (AP) – Oil futures rose Wednesday after the U.S. government’s weekly supply snapshot showed declining inventories of crude and distillate fuel, which includes heating oil. Prices had trended lower earlier in the day amid milder weather in the United States and a growing consensus that OPEC can live with lower prices.
But they reversed course after the U.S. Energy Department report, which showed a 1 million barrel decline in crude oil inventories and a 3 million barrel decline in distillate fuel.
Light, sweet crude rose 50 cents to $45.90 a barrel in late morning trade on the New York Mercantile Exchange.
In London, Brent crude rose 43 cents to $43.50 on the International Petroleum Exchange.
Analysts surveyed by Dow Jones Newswires expected the data to show an average increase of 730,000 barrels in crude stocks and a decline of 1.4 million barrels in distillate stocks.
“The report was definitely on the bullish side,” said Ed Silliere, vice president at Energy Merchant in New York.
Still, Silliere said he expects crude inventories to begin growing over the next several weeks as refiners temporarily shut down some production to perform annual maintenance. There is typically a lull in demand between February and May, the transition between the peak season for heating oil and the peak season for gasoline.
U.S. crude inventories stand at 294.3 million barrels, or 8 percent above year ago levels, according to the Energy Department. Distillate supplies are at 115.6 million barrels, or 5 percent lower than last year.
Traders also focused on how much oil prices could fall before the Organization of Petroleum Exporting Countries takes action. With oil prices near $50 a barrel, OPEC members decided to leave output quotas unchanged at their Jan. 30 meeting. Some officials indicated then that oil prices at $50 weren’t detrimental to the global economy.
But analysts noted that recent statements from OPEC officials indicate the group wants prices to fall from their current levels. Most prominently, Iranian oil minister Bijan Namdar Zangeneh – normally a price hawk – was quoted over the weekend as saying there is no reason for oil prices to be above $40 a barrel.
Saudi Oil Minister Ali Naimi added to the calls for stable prices. Without suggesting whether he thought prices are too high, he said Tuesday the kingdom will continue to pump 9 million barrels a day to help stabilize oil prices and to meet world demand.
Paul Horsnell, head of energy research at Barclays Capital in London, said he expected crude to trade between $40 and $50 over the next few weeks – with the lower end the likely floor but no visible ceiling.
“Sellers become buyers” at the US$40 level, he said. “We haven’t seen prices below $40 since July 14.”
Analysts said crude oil’s long-term outlook was still bullish, with rising demand from India and China keeping supplies tight while the possibility of a disruption to Middle East supplies remained.
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AP Business Writer Brad Foss in Washington contributed to this report.
AP-ES-02-09-05 1124EST