Oil rises above $74

Oil prices rose slightly in thin pre-holiday trade on Tuesday, ahead of weekly inventory data which is expected to show a draw in US crude stocks. Crude stockpiles fell nearly 1 million barrels last week, as refiners drew down inventories, according to a Reuters poll of analysts on Tuesday. Distillate stocks are expected to have fallen by 1.9 million barrels.
The new front-month February contract for US crude futures rose 68 cents to settle at $74.40 a barrel, after earlier falling $1, pressured by a stronger dollar. In London, Brent crude for February rose 47 cents to settle at $73.46. "The late buying appeared to emanate from short covering ahead of the weekly (inventory) stats," said Jim Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois.
Weekly inventory data will come from the American Petroleum Institute report at 4:30 pm EST Tuesday and from the US Energy Information Administration on Wednesday. US equities rose on Tuesday after a bigger-than-expected jump in November existing home sales reassured investors the housing market was stabilising and increased optimism about the US economy.
"Oil may have also scooped up some support from continued stock market strength," Ritterbusch said. Crude prices fell earlier in the day after Opec agreed to maintain its existing production targets and as the dollar rose against other currencies. Opec oil ministers, content with current oil prices, agreed to leave output unchanged in a meeting on Tuesday and decided to meet again on March 17.
OPEC OUTPUT Oil prices above $70 a barrel have satisfied Opec in recent months enough for the group to decide not to change its output targets. The Organisation of the Petroleum Exporting Countries pumps about 50 percent of the world's oil exports and has seen crude prices almost double since the start of the year, after it sliced output when the economic recession hit fuel demand.
The deal left the implied target for Opec output, excluding Iraq, at 24.84 million barrels per day. But oil traders and analysts were worried Opec members were not sticking to their production targets and that output was rising steadily. "There is some reason for concern because, if you look at the numbers, the upside creep in production each month is considerable," said Mike Wittner, global head of oil research at Societe Generale in London.
"At this point, compared to the low point in February-April, Opec output is about 1 million bpd higher than it was. So, although we are bullish going forward, Opec really does need to address compliance." Opec's adherence to its output targets peaked in February at about 80 percent, but has since slipped to only about 60 percent.