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Oil prices rise as traders digest OPEC cut
AFP
LONDON
Petroleumworld.com 12 15 06World oil prices advanced on Friday after a decision on Thursday by the Organization of Petroleum Exporting Countries to cut output further from February, dealers said.
New York's main contract, light sweet crude for delivery in January, rose 37 cents to 62.88 dollars per barrel in electronic deals before the official opening of the US market.
In London, Brent North Sea crude for February delivery gained 42 cents to 63.31 dollars in electronic trading. The January contract had expired on Thursday at 62.12 dollars.
On Friday, crude futures were "still underpinned by news from yesterday that OPEC is going to introduce yet another output cut", Sucden analyst Michael Davies said.
OPEC's decision to cut output by 500,000 barrels per day (bpd) from February showed the oil cartel's resolve to maintain crude prices at 60 dollars and above, dealers said.
"The indication from OPEC is they are determined to defend the 60-dollar price level," added Victor Shum, an analyst with energy consultancy Purvin and Gertz.
OPEC ministers meeting in Nigeria on Thursday announced the latest round of production cuts which followed a reduction of 1.2 million bpd which became effective last month.
The cartel's cuts were made in a bid to prop up weak oil prices, which have fallen some 20 percent since peaking about 78 dollars per barrel in July and August.
Citigroup analyst Tim Evans added: "We would still read (Thursday's cut) as a further clear statement that OPEC intends to keep a floor under the market and is not satisfied with the price progress since the prior 1.2 million bpd cut."
OPEC has been concerned recently about bulging worldwide inventories and anticipated non-OPEC supply growth in 2007. However, it has also sought to prevent an oil price spike that will damage world economic growth.
Evans said that the new 500,000 bpd cut would help dissipate some of the outright scepticism in the market over whether all cartel members complied with the previous November 1 cut.
Thursday's announcement risks antagonising consumer countries and comes after warnings that a further reduction could spark sharply higher prices in the coming months, as oil demand peaks during the northern hemisphere winter.
Oil prices have found considerable support this week from news that crude stockpiles in the United States -- the world's biggest consumer of energy -- fell across the board last week.
However, milder-than-normal temperatures so far this year have meant lower winter fuel demand, limiting the upside to prices, according to analysts.
AFP 15 1206 GMT 12 06
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