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Oil prices surge on Saudi output, US supplies
AFP
NEW YORK
Petroleumworld.com 01 31 06Crude oil prices rocketed nearly three dollars Tuesday on signs that OPEC kingpin Saudi Arabia is gearing up to cut its output, traders said.
The smart rebound from Monday's price falls came also ahead of a US government report that was forecast to reveal lower heating fuel supplies amid a cold snap.
New York's main oil futures contract, light sweet crude for delivery in March, leapt 2.96 dollars to close at 56.97 dollars a barrel.
In London, the price of Brent North Sea crude for March delivery jumped 2.71 dollars to settle at 56.39 dollars a barrel.
Crude prices had retreated Monday as traders locked in gains from last week's jump above 55 dollars per barrel, despite cold weather in the United States and geopolitical concerns in oil exporters Iran and Nigeria.
But sentiment shifted as the market prepared for the US Department of Energy's weekly report on American crude oil inventories Wednesday.
And the Wall Street Journal, citing an unnamed senior Saudi official, reported that Saudi Arabia would reduce its oil production by another 158,000 barrels per day from Thursday, while more cuts are on the way.
Saudi Arabia is the leading member of the Organization of the Petroleum Exporting Countries (OPEC), which has twice announced cuts to its combined output in recent weeks.
"Crude futures were higher on the back of forecasts for a decline in distillate inventories in the US, following colder than usual temperatures," said Sucden analyst Michael Davies.
Recent freezing temperatures across the US northeast -- the biggest consumer of heating oil in the world -- were likely to have stoked demand and reduced distillate inventories, which include heating fuel.
Over the past week, oil prices have bobbed around the 55-dollar level as colder temperatures have hit the northern hemisphere.
Nevertheless, crude futures are still down about 10 percent from the beginning of 2007 owing to unusually warm weather earlier in the winter.
More cold weather is forecast, with well below normal temperatures seen ahead for a large swathe of the United States -- from the midwest Plains to the southern and eastern coasts.
"There is very cold weather in the midwest and it drove natural gas prices up too," Alaron Trading analyst Phil Flynn said.
"Saudi Arabia said they would cut production. That suggests something different from their comments saying that they were comfortable with prices around 50 dollars," he added.
Prices have slumped since striking highs above 78 dollars a barrel last summer, but the OPEC production cuts have done little to arrest the slide.
Saudi Arabia had quashed talk of another emergency OPEC meeting to stage a third cut in the cartel's production, but appears to be shifting its own intentions.
Wachovia Securities economist Jason Schenker cited several factors for Tuesday's steep rally in prices, including "concerns about a draw in (US) distillates" and a strong reading for US consumer confidence.
He also evoked the "statement made by Saudi Arabia saying that they will effectively cut production in February."
"The evolution of the prices will depend on the size of the draw in distillates tomorrow," Schenker added.
The latest reported cut would mean that Saudi Arabia has reduced its crude output by about one million barrels per day in the past six months.
AFP 30 2035 GMT 01 07
Copyright© 1999 AFP. All Rights Reserved.
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