Oil Rises on Global Production Outages
Oil prices rose on Wednesday as outages that have knocked about a million barrels daily from world supply outweighed U.S. government data showing builds in gasoline and distillate supplies.
U.S. crude futures settled up 69 cents at $46.37 a barrel while Brent crude in London was up 56 cents at $43.71 a barrel.
Global supply outages have lifted prices with output offline in the Gulf of Mexico, the North Sea, Nigeria and Iraq (news - web sites).
Iraqi exports have been stymied by continued sabotage on its northern pipeline infrastructure and power problems in the south, forcing Baghdad to cut all its February-June Basra Light crude sales contracts by 10 percent, or about 160,000 bpd.
Dealers are worried that violence leading up to or following the Jan.
30 elections could further hamper oil flows, singled out as a prime target by al Qaeda leader Osama bin Laden (news - web sites). The concerns have helped push oil up nearly $3 a barrel since the beginning of the year.
Oil also rose on a weaker dollar. "We held fairly strong on crude because of the weakness of the dollar, with traders concerned that OPEC (news - web sites) might cut production because of the dollar's low value," said Phil Flynn, analyst at Alaron Trading in Chicago.
The Organization of the Petroleum Exporting Countries will meet on Jan. 30 to discuss whether further cuts may be necessary as the northern winter ends.
The group on Wednesday decided to hold the meeting as scheduled even though it clashes with the date of Iraq's elections.
DISTILLATES REMAIN IN YEAR-ON-YEAR DEFICIT
Crude had fallen in the morning after the U.S. Energy Information Administration said distillate inventories, which include heating oil and diesel fuel, rose 1.9 million barrels, more than expected, to 123 million barrels.
Distillate stocks, which are still 8 percent below last year, have risen in the past two weeks as unseasonably mild weather crimped heating demand.
"Production held at near-record levels despite the slump in runs, and imports held at a healthy level," said Jim Ritterbusch of Ritterbusch and Associates. U.S. distillates output the week earlier hit a record average of 4.3 million barrels per day.
Forecasts that the U.S. winter will turn chillier than usual toward the end of this month and into February have renewed fears of a possible winter supply crunch.
Private forecasters EarthSat said the northeastern United States should experience a colder than normal February and that the first sustained chill was expected to start this weekend.
U.S. crude oil stocks fell by 3 million barrels last week to 288.6 million, the EIA said. Stocks are around 7 percent above last year's levels.
The output disruptions coincide with OPEC's implementation of its 1 million bpd output cuts from Jan. 1. Top producer Saudi Arabia informed some global customers this week that they could expect even less oil in February than this month.
Some OPEC members say the cartel will consider tightening supply at the meeting later this month if prices fall below $40 a barrel.
(Yahoo Jan. 2005)