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Oil prices rally on OPEC cuts, lower US reserves
AFP
NEW YORK
Petroleumworld.com 11 10 06
World oil prices surged past 61 dollars a barrel to two-week highs on Thursday on OPEC warnings about output cuts, following a heavier-than-expected fall in US heating fuel reserves.
New York's main contract, light sweet crude for delivery in December, jumped 1.33 dollars to close at 61.16 dollars a barrel.
In London, Brent North Sea crude for December delivery leapt by 1.73 dollars to settle at 61.32 dollars a barrel.
Crude futures soared to their highest levels since October 26 on perceptions that the OPEC cartel is serious about cutting its production levels to support prices, PFC Energy trader Carl Calabro said.
"The market is stronger because OPEC is saying and at least most of OPEC is doing the right thing to support oil prices, and the weather is getting colder here (in the United States), which improves demand," he said.
Colder weather in the world's biggest energy-consuming nation would drive up demand for heating fuel, whose levels held by oil companies are already falling.
The US Department of Energy said Wednesday that inventories of distillates, including heating oil and diesel, fell 2.7 million barrels to 138.6 million in the week to November 3. Analysts had expected a fall of only 800,000 barrels.
The DoE report intensified doubts about the outlook for energy supplies after Saudi Arabian oil minister Ali al-Naimi indicated Monday that the OPEC cartel could cut output further at its meeting in December.
The Organisation of the Petroleum Exporting Countries last month said it would cut its total output by 1.2 million barrels per day (bpd), effective November 1, so as to put a floor under falling oil prices.
Many oil pundits have been sceptical about whether OPEC members will actually go through with the cut, but the comments by al-Naimi and other cartel ministers have lent credence to the cartel's official position.
Traders meanwhile digested the Democrats' dramatic seizure of the Senate as well as the House of Representatives in Tuesday's US mid-term elections.
The opposition party has pledged to make the United States more self-sufficient in energy by boosting alternative energies and reducing foreign oil imports.
"Since the Democrats have gained control, it has created uncertainty, specifically with energy policies, and uncertainty always leads to price increases," said Victor Shum of Purvin and Gertz in Singapore.
But James Williams at WTRG Energy said the Democratic victory would mean "very little" for US energy policy in the short run.
AFP 09 2019 GMT 11 06Copyright© 2006 AFP. All Rights Reserved.
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