Oil prices rise on falling gas suppliesadmin
Oil prices rose Wednesday, as traders assessed declines in U.S. supplies of gasoline and diesel fuel.
Other factors prompting traders to buy were the possibility of further
OPEC production cuts; the specter of cold winter weather; and the feeling that the newly empowered Democrats won’t be shaking up the oil industry anytime soon.
“There’s some relief over the bipartisan tone the Democratic leadership taking,” said Cameron Hanover analyst Peter Beutel. “There had been a perception that the Democrats might, if they re-take power, have an interest in immediately hurting oil companies. But there’s been no talk of that ”” it’s been all, let’s move slowly and deliberately.”
Light sweet crude for December delivery climbed 90 cents to settle at $59.83 a barrel Wednesday on the New York Mercantile Exchange.
Brent crude on London’s ICE Futures exchange rose $1.11 to settle at $59.59 a barrel.
Heating oil futures rose more than 3 cents to settle at $1.7106 a gallon, and unleaded gasoline futures rose nearly 4 cents to settle at $1.5636 a gallon. Natural gas futures rose 6.8 cents to settle at $7.823 per 1,000 cubic feet.
U.S. crude inventories rose last week by 400,000 barrels to 334.7 million barrels, but gasoline inventories fell by 600,000 barrels to 204 million barrels, the U.S. Energy Information Administration said Wednesday.
Distillate fuel inventories fell by 2.7 million barrels to 138.6 million barrels, the EIA said. Distillates include heating oil and diesel fuel; heating oil inventories rose slightly last week, but were offset by a huge 10 percent decline in diesel inventories.
Refineries’ production decreased slightly last week to 88.1 percent, the EIA said.
“This is not a radically shocking set of data. However … it shows somewhat smaller inventory surpluses than what we’ve seen in recent weeks,” said Tim Evans, an energy analyst at Citigroup Global Markets. He added that the increase in crude was smaller than usual for this time of year, and the gasoline and distillate decreases were larger than usual.
U.S. oil and natural gas supplies are still ample ”” above the average for this time of year. But energy prices remain buoyed by strong demand and weather forecasters predicting a colder-than-normal winter in some parts of the United States.
The market is also considering whether the Organization of Petroleum Exporting Countries would make additional production cuts in December following a plan to reduce oil output by 1.2 million barrels a day starting Nov. 1. Since OPEC’s announcement in mid-October, analysts and traders have questioned how many of the 11 OPEC members will deliver on the cuts they’ve promised.
“In general, the market remains skeptical of the entire OPEC production cuts story … The market has struggled to stop declining,” said Evans, pointing out that prices have barely risen since OPEC’s output reduction announcement.
“But in time, the market will be convinced that the production cuts do matter,” Evans added, noting that demand could outpace supply for the first few months of 2007.
Qatar’s oil minister, Abdullah Al-Attiyah, said Wednesday he is confident that all OPEC members will comply with their recent pact to cut oil supplies.
Speaking to reporters at the end of a Gulf Cooperation Council oil ministers meeting in Abu Dhabi, Attiyah said, “We have to believe it, and we will check in the Abuja meeting. They have promised to obey and respect the resolution.”
OPEC President Edmund Daukoru, also Nigeria’s oil minister, said this week that low prices may encourage the oil cartel to further cut its output, but it doesn’t have a specific price floor or band that it wants to defend. The group would discuss production at a December meeting in Abuja.
On Monday, Kuwaiti Energy Minister Sheik Ali Al Jarrah Al Sabah told reporters at the Abu Dhabi meeting that OPEC’s Nov. 1 production cut had stabilized the market, and that further cuts might not be necessary. But Saudi Arabia’s Oil Minister Ali Naimi reiterated that another cut was likely.
Oil prices have tumbled from a July high above $78 a barrel, trading around $57-$61 a barrel over the past month.
In its 2006 World Energy Outlook released Tuesday, the International Energy Agency said Tuesday that global energy needs will surge 53 percent by 2030, with more than 70 percent of that increase coming from developing countries, led by China and India. The IEA said the world’s governments must substantially increase investment in energy supply infrastructure to prevent a global shortage by 2030.