Oil prices rally as OPEC expected to cut output
Oil prices rally as OPEC expected to cut output
Sujata Rao, Reuters, London
World oil prices rose to their highest levels in almost three
weeks on Monday as expectation mounted that OPEC will agree to
cut output when it meets in June.
London benchmark Brent crude futures stood 43 cents higher by
1200 GMT to $25.53 a barrel, while U.S. light crude was 27 cents
higher to $27.99 in electronic trade.
"The market is moving on the perception of what OPEC's
strategy will be when they meet on June 11 and so far all the
indications are they will cut to bring the market back in
balance," said Commerzbank analyst Steve Turner.
"The second factor is the U.S. stocks, where so far inventory
builds have failed to materialize," he added.
On Monday, OPEC kingpin Saudi Arabia, keeping to an April
cartel pact to reduce crude supplies, told Western customers to
expect up to a fifth less oil in June while Asian buyers will see
a six to seven percent cut in supply.
OPEC President Abdullah al-Attiyah said on Friday that the
cartel needed to implement more supply cuts to make room for a
possible resumption of Iraqi exports.
Attiyah traveled to Moscow on Monday, following an OPEC
invitation to producers outside the cartel to attend the June
meeting. Russia is the world's leading non-OPEC oil exporter.
Some analysts see prices rising further as an expected OPEC
cut will coincide with U.S. oil stocks far below normal and a
receding prospect of a speedy return of Iraqi crude exports.
Iraq's oil industry head Thamir Ghadban said on Sunday Baghdad
would have to push back its oil production target of 1.5 million
barrels per day (bpd) by about a month after receiving a clearer
picture of damage assessment to facilities.
The sector, battered by 12 years of economic sanctions, is now
suffering from looting and insecurity, he said.
Ghadban had earlier said Iraq aimed to boost output to half
its pre-war rate by end-May, up from 200,000 bpd now.
"We shall meet that target at a later date -- perhaps by the
end of June," Ghadban said.
But demand too has suffered as Asian economies are ravaged by
the deadly SARS epidemic. On Monday China's largest refiner
Sinopec said it was cutting production by up to five percent as
reduced travel due to SARS was hitting sales of oil products.
But Commerzbank's Turner said the weak Asian situation was
countered by robust demand in the United States.
"This is reflected in the fact that we are not seeing the
stock builds that we should be seeing at this time of the year,"
he said.
U.S. crude stocks are now 12 percent under year-ago levels and
the start of the summer driving season at the end of May will
buoy gasoline buying and potentially eat further into already
tight crude stocks.