Oil prices rose on Monday on worries that production cartel Opec could decide to cut output soon even after it kept output steady at its meeting over the weekend. US oil prices rose 77 cents to $47.95 a barrel. London Brent crude was up 65 cents at $45.60. The Organisation of the Petroleum Exporting Countries kept production steady at its meeting over the weekend, but left the door open to shaving production later to contain a seasonal second quarter stockbuild. The group next meets on March 16.
"There is a threat out there that Opec might cut back quotas before their March meeting and that is keeping the market nervous," said Marshall Steeves, analyst at Refco Group in New York.
The Middle East Economic Survey said on Monday that if Opec decided it needs to reduce oil production before its March meeting, the group would make a substantial cut that could take effect as soon as March 1.
Opec ministers agreed on Sunday to keep output limits unchanged at 27 million barrels per day (bpd) as near-$50 prices put a hold on any second-quarter supply-tightening measures.
The White House on Monday said it believes it is important for Opec to act to ensure affordable energy supplies. "We don't comment on specific Opec actions per se, but we believe it's always important that they act in a way that continues to further economic growth and allows there to be affordable, abundant supplies of energy available," White House spokesman Scott McClellan said.
In Iraq, insurgents killed 35 people when millions went to the first multi-party polls in half a century, but oil exports from the southern terminals of Basra and Khor al-Amaya ran smoothly at 1.7 million bpd on Sunday, industry officials said.
Keeping a lid on gains, frigid temperatures in the heating oil-consuming US Northeast are forecast to return to normal this week and remain warmer than usual the rest of winter, easing pressure on sub-par fuel stockpiles.
Opec ministers meeting in Vienna sent their clearest signal yet that higher prices are here to stay as producers grow more confident that higher fuel costs are not damaging the world's economic health.
"Fifty dollar oil will not play a big role in slowing up growth of the economy. Some analysts say even $60 oil will play a small role in affecting growth," said Opec President Sheikh Ahmad al-Fahd al-Sabah of Kuwait.
Opec formally abandoned its long-defunct $22-$28 price target, and appears set to defend $40 as a price floor for US crude, a level that could be tested in the next few months.
"The wait-and-see attitude which prevailed is likely to be taken bearishly by oil markets," said Deutsche Bank in a report. "The potential is for for the oil market to trade down hard from its cold weather, Iraq election and Opec meeting peaks."
The cartel last cut production by 1 million bpd at its meeting on December 10, a day when oil prices touched a nearly five-month low of $40.25 a barrel after falling more than $15 in the course of just seven weeks.
Opec meets next in Isfahan, Iran, in March, but could call a teleconference if prices drop before then.
Ministers will be watching US stockpiles carefully as the focus shifts away from low winter fuel levels and toward healthier crude and gasoline tanks ahead of the second quarter, when demand hits a seasonal low. Opec still fears prices could fall sharply if inventories build too quickly.
US crude oil inventories are already 9 percent above year-ago levels and gasoline stockpiles are up 3 percent. Heating oil stocks have remained in a deficit versus the previous year throughout the winter, giving prices some support.
SINGAPORE: Oil prices tumbled below $47 on Monday after Opec producers agreed to keep crude output unchanged for now and Iraq's elections passed without disruption to oil exports.
US oil prices fell 62 cents to $46.56 a barrel in electronic trade, putting them 6 percent below last week's two-month high near $50.
Comments
Comments are closed.