Oil trades below $60 on high inventories, OPEC cut skepticism
Crude oil traded below $60 a barrel in New York as analysts speculated that US oil inventories will increase for the fourth week amid skepticism that OPEC's plan to cut supplies will prop up prices.
A US Energy Department report later today will probably show crude oil supplies gained 3 million barrels last week, based on the median estimate from a Bloomberg News survey of 15 analysts. On October 13, US oil stockpiles held 14% more than the five-year average for the period. “The price of oil has fallen almost 25% from a peak in a matter of weeks” because of “well-filled inventories,” said Eugen Weinberg, a senior commodities analyst at DZ Bank AG in Frankfurt. “The market is skeptical. Everyone is asking whether OPEC members will be disciplined and stick to the agreement to cut output.” Crude oil for December delivery rose 10 cents to $59.45 a barrel in after-hours electronic trading on the New York Mercantile Exchange at 10:44 a.m. in London. Brent crude for December settlement advanced 17 cents to $60.03 a barrel on the ICE Futures exchange in London. The Organization of Petroleum Exporting Countries, which pumps 40% of the world's oil, said October 19 it would cut output 1.2 million barrels a day in an effort to support prices. New York-traded crude has dropped by about $19 a barrel from a record high of $78.40 on July 14. The OPEC crude oil basket price rose 37 cents to $53.89 a barrel yesterday, the group said in an e-mail. The daily price index is a weighted average of 11 crude blends produced by OPEC nations. The basket price has averaged $62.12 a barrel this year, up from $50.64 barrel for all of 2005.
Saudi Aramco, the world's largest state oil company by output, will cut exports of its Arab Heavy crude by more than 20% and Arab Light oil by about 5% below contracted volumes next month for Asian customers. The company told customers this week to expect reductions of as much as 8%, according to Asian refinery officials. Crude is pushed up by rising demand for heating oil, which peaks in the fourth quarter, when refiners in the US, Europe and north Asia supply winter fuel. Below-normal temperatures until October 31 in the US. Northeast, the nation's largest heating oil consumer, will boost heating demand 30% above normal for this time of year, researcher Weather Derivatives said. “Crude oil inventories may have risen and even though it appears that cold weather has hit the US it may not be enough for prices to rise” above $60 a barrel, said Mikikaru Amano, an analyst at Taiheiyo Bussan Co. in Tokyo. Heating oil for November delivery rose as much as 1.28 cents, or 0.8%, to $1.708 a gallon in after-hours electronic trading on the New York Mercantile Exchange. It traded at $1.702, at 10:40 a.m. in London. US supplies of distillates, including heating oil and diesel, may have dropped by 1.5 million barrels in the week to October 20, their third consecutive decline, according to the Bloomberg News survey. The Energy Department will publish the inventory report at 10:30 a.m. in Washington. (Bloomberg)
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