Crude oil over US$47 a barrel as OPEC warns of output cut

Crude oil over US$47 a barrel as OPEC warns of output cut

Associated Press, Vienna

Crude futures rose on Friday after the president of the
Organization of Petroleum Exporting Countries (OPEC) said the
group might cut output at its June meeting if stocks continue to
build.

Analysts said that -- with inventories in the United States at
a six-year high and present prices not putting much of a dent in
demand -- recent OPEC concerns about market volatility might now
be eroding in favor of propping up crude's value.

Light, sweet crude for June rose 50 U.S. cents to US$47.42 a
barrel on the New York Mercantile Exchange by afternoon in
Europe.

The June contract, which expires Friday, closed at $46.92 a
barrel on Thursday. Heating oil prices rose by more than a cent
to $1.3955 a gallon (3.8 liters) while unleaded gas rose a cent,
fetching $1.4465 a gallon.

On the International Petroleum Exchange, Brent crude was up 32
cents, at $48.20.

Earlier this week, Saudi Oil Minister Ali Naimi said his
country -- the group's main producer -- was "ready to raise
output as the market dictates." But in a seemingly conflicting
signal on Thursday, OPEC president Sheik Ahmed Fahd Al Ahmed Al
Sabah, who is also Kuwait's oil minister, said the group could
cut its output ceiling by 1 million barrels a day if global oil
inventories pile up too quickly.

OPEC traditionally produces more than that official quota, now
at 27.5 million barrels a day. PVM Oil Associates in Vienna said
that -- without Iraq, which is exempt from ceilings while it
rebuilds -- over-quota output from OPEC's 10 other members was at
just over 700,000 barrels in May, or about 300,000 barrels less
than Al Sabah has estimated.

Crude futures are more than $10 below April's all-time high of
$58.28. OPEC is to meet on June 15 in Vienna to plan strategy for
the second half of the year.

Oil editorial manager Ng Weng Hoong at Energyasia.com said Al
Sabah's comments are "a warning that traders will take
seriously."

"These producers are not happy with the decline," Ng said.
"They'll not let it go down now."

Analyst Jonathan Copus of Investec Securities in London said
OPEC's anxieties are being fed by "a six-year high in (U.S.)
inventories, prices pulling back a bit and various conflicting
pieces of information about the possibility of demand erosion."

The U.S. Department of Energy revealed a build of 334 million
barrels in the previous week, the 13th increase in the past 14
weeks. Inventories are up 34 million barrels from a year ago, the
highest since May 1999.

However, Ng said the inventory figures are not as bearish as
they seem.

The U.S. lacks sufficient refineries to process the crude oil,
and global demand is growing faster than the stock builds, Ng
said. He added that traders should also focus on China and India,
whose appetites for crude oil are still increasing.

The Energy Department said Thursday that U.S. refiners ran at
94.0 percent capacity, up from 91.8 percent a week ago. With
refiners approaching peak capacity, analysts worry that the
facilities may not be able to cope when demand, especially for
gasoline, rises in summer.