Oil holds near 3-month lows
Reuters | May 17, 2005
LONDON - Oil prices fell toward three month lows on Tuesday as top world exporter Saudi Arabia said it had no plans to reduce supply despite rising U.S. crude inventories and slowing demand growth.
U.S. crude (CLc1) eased 31 cents to $48.30 a barrel after hitting $47.60 on Monday, the lowest level since Feb 18. London Brent crude (LCOc1) was down 10 cents at $48.99 a barrel.
Oil has slumped nearly $10 from April's record high of $58.28 a barrel as the Organization of the Petroleum Exporting Countries boosts supplies almost to 25-year highs, raising U.S. crude stocks to their highest level since July 1999.
Saudi Arabia's Oil Minister Ali al-Naimi said on Tuesday that the kingdom will not reduce its oil production and that Saudi output will rise further for the fourth quarter.
``One of the reasons inventories are built is to anticipate fourth-quarter demand,'' Naimi said at an energy conference in Washington held by the Center for Strategic and International Studies.
Prices needed to remain in a range of $30 to $50 per barrel to stimulate investments needed in oil supply infrastructure, Naimi said.
``It's a question of investment. If there was confidence that the price would be anywhere from $30 to $40, $30 to $50, this range, I believe the capacity is there,'' he said.
Prices were also pressured by expectations that a U.S. government inventory report due on Wednesday would show an increase of 1 million barrels. Crude stocks have built in 12 out of the last 13 weeks.
OPEC's secretariat on Tuesday reduced its forecast for world oil demand growth this year, but said lower-than-expected non-OPEC supply would mean a greater need for the cartel's oil later this year.
In a monthly report, OPEC said it expected growth of 1.82 million barrels a day to a total 83.94 million bpd, cutting 80,000 bpd from its previous forecast due to lower-than-expected first quarter demand in Europe and China.
Despite the cut in its overall demand estimate OPEC raised the estimate of likely demand for its oil over the third and fourth quarters by 100,000 bpd each, to 28.9 million bpd and 30.5 million bpd respectively.
The higher 'call' on OPEC oil was generated by a reduction in OPEC's estimate of how much supply growth producers outside the cartel will achieve this year.
A firmer U.S. dollar -- which has hit seven-month high against the euro -- has also pressured oil prices.
A stronger dollar tempts speculators to switch money from commodity markets into treasuries and makes dollar-denominated oil more expensive for investors using other currencies.
Some analysts say the speculative move out of oil may be slowing.
``With speculators now neutral in crude oil after liquidating large net long positions over the past six weeks ... further price downside looks limited,'' Barclays Capital said in a report.
``Refinery utilization is now beginning to move up after seasonal maintenance and this should eliminate the crude oil surplus,'' it added.