Oil stays high, defying U.S. crude stock increase
Oil stays high, defying U.S. crude stock increase
LONDON (Reuters): Blazing oil prices showed no signs of retreating on Wednesday, trading steady despite reports of a big increase in U.S. crude stocks as fears of heating oil shortages this winter in the West mounted.
International benchmark Brent crude futures for October delivery were trading eight cents down at $31.28 while U.S. light crude futures were 12 cents down at $32.62.
Prices have refused to leave the $30 danger zone, spreading anxiety in consuming nations and stepping up pressure on the Organization of the Petroleum Exporting Countries to boost production at its September 10 ministerial meeting in Vienna.
OPEC, locked in a fierce battle with soaring prices despite previous supply increases, is expected to turn up the taps by an extra 500,000 barrels per day (BPD) at that conference.
But jittery traders worry that will not be enough to meet an expected jump in heating oil demand this winter.
"The market is starting to anticipate an increase in supply from the cartel of 500,000 bpd. We believe that this will at best balance the market over Q4 (the fourth quarter) and allow prices to remain strong," said Williams de Broe in its daily oil comment.
The resilience of high oil prices was underscored after the market digested the latest data on Tuesday from the American Petroleum Institute, a pivotal weekly U.S. stocks report.
It indicated that crude supplies recovered somewhat from their recent 24-year lows with a 5.26 million barrel rise after analysts were expecting a 2.3 million barrel increase in crude stocks.
The API report deepened fears over a possible heating oil shortage this winter, as supplies are still almost 30 million barrels below last year's level.
The API said U.S. distillate stocks, which include heating oil, climbed only modestly by one million barrels last week.
Traders will closely watch weekly data from the U.S. Department of Energy's Energy Information Administration due for release on Wednesday for hard clues on market direction.
The spotlight is now on OPEC as it prepares for the September 10 output policy meeting. Cartel statements this week have not been reassuring to those who want to see extra barrels hit the market soon.
OPEC President Ali Rodriguez of Venezuela blamed high taxation among consumer nations and refinery bottlenecks for soaring prices. He added that OPEC crude supply was adequate and that the cartel could not be held responsible for current oil price movements.
Iran, OPEC's second largest producer, took a similar view, with its OPEC Governor Hossein Kazempour Ardebili speaking of sound market fundamentals.