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Oil prices firmer but still below 53 dollars in Asian trade
AFP
SINGAPORE
Petroleumworld.com 01 12 07
Crude oil prices were firmer but still below 53 dollars a barrel in Asian trade Friday, levels not seen since June 2005 as the market continued to focus on warm winter weather, dealers said.
At 1:56 pm (055 GMT), New York's main contract, light sweet crude for delivery in February, was at 52.69 dollars a barrel, up 81 cents from 51.88 dollars in late US trade after the price plummeted 2.14 dollars.
Brent North Sea crude for February delivery was at 52.49 dollars, up 79 cents after ending at its lowest level since May 2005.
High energy stockpiles and warm weather in the northern hemisphere have continued to drive down the price, dealers said.
"Although there have been forecasts about parts of the US getting colder, overall we are still experiencing a warmer winter," said Tony Nunan of Mitsubishi Corporation's energy risk management in Tokyo.
US reserves of distillates and gasoline (petrol) rose sharply last week, offsetting a bigger-than-expected drop in crude oil inventories.
However, AG Edwards analyst Bill O'Grady said US inventories really remain no different from levels this time last year while geopolitical risks remain on the radar.
"Thus, we conclude the break in oil prices has less to do with fundamental changes in the market and more to do with a shift in investor sentiment," he said during US trading hours.
"Given the overall weakness in commodities, one can conclude that the 'wall of money' that has supported commodities in general, and oil in particular, via index fund investment, is probably dissipating," O'Grady said.
At the close of 2006, oil was above 60 dollars, after hitting record highs of 78 dollars in the middle of the year.
Nunan said the price fall could continue until the Organization of the Petroleum Exporting Countries (OPEC) cuts production again.
"I think OPEC should make further production cuts," Nunan said, noting the mild winter weather had not been accounted for.
The cartel decided at a meeting last month to cut output by 500,000 barrels a day from February 2007 after an announced reduction of 1.2 million barrels a day in November.
Nunan said crude prices are unlikely to drop below the strong 50 dollars support level in the coming week.
An OPEC production cut "will work to dampen price volatility, which is a major change from the patterns of the past four years," O'Grady said.
AFP 12 0603 GMT 01 07
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