Traders shrugged off OPEC's decision to keep production levels steady and a big drop in overall U.S. crude stockpiles.

Organization of Petroleum Exporting Countries ministers said Wednesday in Abu Dhabi,well supplied," with crude reserves at comfortable levels. United Arab Emirates, the cartel would leave output unchanged "for the time being," because the world was "

Light, sweet crude for January delivery fell 92 cents to $86.57 a barrel in Asian electronic trading on the New York Mercantile Exchange by late afternoon in Singapore.

The contract fell 83 cents in Wednesday's floor session to settle at $87.49 a barrel, oil's lowest close since Oct. 24.

Oil prices have dropped more than $10 from all time-highs near $100 in November on evidence of rising inventories at Cushing, Okla., the closely watched Nymex delivery terminal. Speculation that OPEC would boost supplies and evidence that some OPEC countries are producing more oil than their quotas have also pressured prices.

Despite holding output steady, OPEC ministers plan to meet again Feb. 1 to review their decision.

Meanwhile, the U.S. Energy Department's Energy Information Administration reported that crude supplies plunged by 8 million barrels last week, much more than the expected 700,000 barrel decline.

But the report was mixed as it also said crude inventories in Cushing, Okla., rose 700,000 barrels during the week ended Nov. 30, the third week in a row supplies there have grown.

Activity at the Cushing terminal is studied closely by oil traders, because it is the physical delivery point for Nymex crude. Falling supplies there are seen as a symptom of a tight market, and those concerns ease when Cushing inventories rise.

Refinery activity was unchanged last week at 89.4 percent of capacity. Analysts surveyed by Dow Jones Newswires, on average, had expected refinery utilization to rise by 0.1 percentage point to 89.5 percent of capacity.

Supplies of gasoline rose by 4 million barrels, much more than the 700,000-barrel increase analysts had expected. Inventories of distillates, which include heating oil and diesel fuel, rose by 1.4 million barrels, countering analyst expectations for a 400,000-barrel decline.

Some of the decline in crude supplies can be explained by oil imports, which fell last week by an average of 980,000 barrels a day to 9.4 million barrels a day. Gasoline imports rose last week by 334,000 barrels a day to an average of 1.2 million barrels a day.

Gasoline demand slid last week by about 90,000 barrels, and is up by 0.2 percent over the last four weeks compared to the same period last year, the EIA said. Analysts consider year-over-year demand growth of less than 1.5 percent to be low.

Heating oil futures dropped 2.25 cents to $2.4668 a gallon while gasoline prices lost 1.3 cents to $2.2040 a gallon. Natural gas futures added 0.2 cent to $7.187 per 1,000 cubic feet.

In London, January Brent crude futures fell 70 cents to $87.79 a barrel on the ICE Futures exchange.

Oil prices fell today in a volatile market on speculation that OPEC may still boost output at its meeting this week despite last week's sharp price drop.

Light, sweet crude for January delivery was down 67 cents to $88.04 in electronic trading on the New York Mercantile Exchange by midafternoon in Europe. The contract had earlier traded as high as $89.94 and as low as $87.47.

In London, January Brent crude dropped 24 cents to $88.02 a barrel on the ICE Futures exchange.

Crude oil contracts tumbled last week on expectations that members of the Organization of Petroleum Exporting Countries will agree at a meeting Wednesday to raise production to help ease high oil prices. That sent prices to their lowest level Friday since Oct. 25 — quite a turnaround from the start of that week when prices were approaching $100 a barrel.

"With oil prices having since receded and comments from some Organization of Petroleum Exporting Countries officials quite noncommittal on what Organization of Petroleum Exporting Countries may or may not do, I think maybe there's just a bit more caution coming into the market," said David Moore, a commodity strategist with the Commonwealth Bank of Australia in Sydney.

In recent days, several Organization of Petroleum Exporting Countries ministers have said their nations are ready to boost oil output to bring down high oil prices. Analysts speculate that the cartel will boost production by anywhere from 500,000 to 1 million barrels a day.

But Sunday, Venezuela's oil minister said his country will oppose any increase in crude oil output quotas during the Dec. 5 OPEC meeting in Abu Dhabi, in the United Arab Emirates.

"We don't see a need to increase oil production ... The market is well supplied," Rafael Ramirez told reporters.

Some analysts, however, said Saudi Arabia, the main OPEC country with spare capacity, could push for a production boost.

"The price collapse of last week could be seen as a lesser incentive for Saudi Arabia to sponsor a new increase," Olivier Jakob of Petromatrix in Switzerland said in a research note. "However, we need to keep in mind that they surprised everybody by sponsoring a (500,000-barrel-a-day) increase at the previous meeting on Sept. 11."

Meanwhile, prices were being supported by news that leading international powers may agree within weeks on a third U.N. resolution imposing sanctions on Iran because of its nuclear program.

A French diplomat said after closed-door talks in Paris on Saturday that a compromise text on a new resolution would be circulated this week among the six countries involved — the United States, Britain, France, Russia, China and Germany.

Clamor for new sanctions — led by the United States, Britain and France — mounted after Friday's collapse of an 18-month European Union effort to persuade Iran to stop uranium enrichment.

Iran is Organization of Petroleum Exporting Countries's second-largest producer, and any hint of new tensions over Tehran's nuclear defiance can cause jittery markets to jump on worries about potential supply disruptions.

Heating oil futures fell 2.35 cents to $2.4915 a gallon (3.8 liters) on the Nymex, while gasoline prices were down 1.31 cents to $2.2175 a gallon. Natural gas futures dropped 21.4 cents to $7.088 per 1,000 cubic feet.

Via: Associated Press
Tags: United Arab Emirates, New York Mercantile Exchange, UK, Petromatrix, ICE Futures exchange, Rafael Ramirez, oil prices, the UAE, Abu Dhabi, Saudi Arabia, France, Russia, China, USA, Germany, OPEC, Venezuela, Iran, NYMEX

Oil prices soared by $4 a barrel yesterday, forcing a promise from the US government to dip into its emergency reserves after a dramatic explosion in Minnesota killed two repair workers and forced the closure of a vital pipeline from Canada that carries a fifth of American crude imports.

The price of West Texas Intermediate blend for January delivery hit $95.17 a barrel, reversing two previous days of heavy falls, and will heap more pressure on OPEC ministers meeting in Abu Dhabi next week to increase the cartel's production.

The fatal accident on the pipeline, operated by the energy transportation group Enbridge, disabled a link that carries crude oil from Saskatchewan to the Chicago area. Four separate conduits on the pipe were completely shut down for a while but two were reopened later.

The US energy department sought to reassure the oil markets by saying it had 63.5m barrels of reserves in the midwest. "Oil from the strategic petroleum reserve is available to alleviate a severe supply disruption and remains available," it said.

The repair to half of the pipeline network and the statements from the energy department soothed the market and the price of oil later fell back to $92.64. The two lines already back in operation carry 1m barrels of oil a day and analysts believe the third line, with a capacity of 450,000 barrels a day, will be back up shortly.

Lawrence Poole, an analyst with Global Insight in London, said in a research note: "Initial comments from Enbridge seem to suggest that the pipeline will not be off-line for more than a few days, and so the implications for oil supply in the US midwest should be limited."

Meanwhile, the International Energy Agency said in a report on global oil supply that although risks were rising due to growing demand, insufficient investment and a concentration of reserves, member countries should be able to cope with overall stocks of 4.1bn barrels.

Via: The Guardian| by Terry Macalister
Tags: International Energy Agency, Global Insight, Enbridge, gas oil prices, Abu Dhabi, IEA, OPEC crude, OPEC Meeting