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.