Oil holds near five-week high on supply worries
Oil holds near five-week high on supply worries
Reuters, London
Oil prices held above the US$30 mark on Friday as the International Energy Agency (IEA) warned of potential supply tightness heading into the northern winter.
Benchmark London Brent crude, up more than 17 percent in barely two weeks since OPEC's surprise decision to cut production from Nov. 1, was off 16 U.S. cents at $29.98 a barrel, having topped $30 for the first time in six weeks on Thursday.
U.S. light crude was down 5 U.S. cents at $30.96 a barrel, showing little inclination to give back Thursday's 4 percent gains, which were triggered by concerns over a possible supply crunch of winter heating oil in the United States.
Those fears were stoked by recent reports showing heating oil inventories are seven percent below last year's level in the U.S. and distillate supplies -- including the winter fuel -- 4 percent less in Europe, separate reports showed.
The IEA, adviser on energy to 26 industrialized nations, on Friday forecast that global oil demand growth would accelerate into the fourth quarter, rising 0.9 percent over last year's level and exceeding 80 million barrels per day (bpd) for the first time.
In 2002, strong demand and low inventories pushed heating oil prices to all-time highs. Weather forecasters are expecting this year's winter to be just about as cold.
"Heating oil demand growth is expected to rebound sharply in the fourth quarter, as U.S. natural gas supplies remain constrained in the face of robust demand," the IEA said in a monthly report.
Heating oil futures in New York, up about 22 percent in the past three weeks, eased just 44 points to 84.98 cents a gallon on Friday -- still a far cry from the $1.31 a gallon peak reached in late February of this year.
OPEC's basket of crudes rose to $28.60 on Thursday, topping its $22-$28 preferred price band three weeks before its latest round of supply cuts come into effect.
OPEC president Abdullah al-Attiyah on Friday reiterated his call on non-OPEC countries to join the cartel in curbing output to support prices in 2004, when he expects an oversupply of oil.
"The market will see oversupply in 2004 so OPEC and non-OPEC should sit together and should have a serious talk," Attiyah, who is also Qatar's oil minister, told Reuters in Tokyo.
The cartel is readying itself for mounting pressure next year as continued high prices encourage non-OPEC production, eroding OPEC market share. Prices over $25 a barrel also make it unlikely that producers like Norway and Russia will voluntarily stem output, analysts say.
They must also cope with Iraq's swift return to the market, as exports are set to rise to an estimated 1.5 million bpd in October from 930,000 bpd in September, according to industry sources.
If the Kirkuk pipeline from the northern fields resumes operation in mid-October as expected, that would open up another potential 800,000 bpd of supplies before year-end.
OPEC has already taken steps to accommodate the return of Iraqi output, curbing production by 300,000 bpd to just 25.2 million bpd in September, the IEA said.