Oil prices ease in Asia on profit-taking

Oil prices ease in Asia on profit-taking

SINGAPORE (Reuters): Crude prices in Asia edged lower on Thursday after New York's rally overnight attracted some profit taking. March New York Mercantile Exchange (NYMEX) crude last traded at US$28.72 at 0725 GMT, down five cents from the New York close.

The contract surged 75 cents in New York after the latest U.S. stock data showed inventories were at their lowest levels in over a decade.

U.S. crude prices have risen 12 percent this year.

In January NYMEX crude rose to $29.95 per barrel, the highest levels since the Gulf War.

Prices have almost trebled from the low of $10.35 hit in December 1998, boosted by a concerted policy of output cuts by the Organization of Petroleum Exporting Countries (OPEC) and some other producers.

Mexican Oil Minister Luis Tellez moved late on Wednesday to calm worries that oil stocks were too low and prices too high.

He said the surge to $29.95 was caused by "short-term shocks", like the suspension of Iraqi exports late last year, Y2K stockpiling and a cold snap in the northeast of the United States.

Market watchers "should not be overly concerned" about current prices near $30, he said in Houston.

Mexico, along with Saudi Arabia and Venezuela, were the main architects of producers' efforts in the past two years to rein in supply.

Tellez said he would work "extremely closely" with major producers to ensure coordination of policy when the output cut agreement expires at the end of March.

But Tellez did not say if he wanted the policy to continue, or whether he wanted changes.

The Saudi-owned London-based al-Hayat newspaper on Wednesday quoted a senior Saudi oil source as saying OPEC was satisfied that the world oil market was balanced and the cartel would not take any action to tilt this balance.

But sources familiar with talks between producers Saudi Arabia, Venezuela and Mexico, told Reuters the three were now agreed that oil markets had swung too strongly against consumers and that extra crude was needed soon to douse the heat in prices.

The sources said Saudi Arabia, Venezuela and Mexico were negotiating a strategy aimed at easing more supply into the market to bring prices down gently.

But there were difficulties convincing other producers, which were keen to keep prices high, the sources said.

The supply restrictions have pushed oil inventories to dangerously low levels in the past year.

The American Petroleum Institute (API) reported this week that crude stocks in the U.S. -- which consumes a fifth of world oil -- were near their lowest level since 1976.

It said U.S. distillates stocks, mostly made up by heating oil, were at their lowest level since May 1997.