Oil Prices Rise on Fall in Crude Stocks
Associated Press | June 23, 2005
Oil prices rose Thursday after a U.S. government report showed another drop in crude inventories as distillate stocks grew.
Analysts said the possibility of an OPEC decision to boost output ceilings was unlikely to drag prices down substantially because of nagging concerns about availability later this year and about refinery capabilities.
Light, sweet crude for August delivery on the New York Mercantile Exchange was up 17 cents at $58.26 a barrel by afternoon in Europe.
Heating oil and gasoline were both up less than a cent, at $1.6292 and $1.6215 a gallon respectively.
In London, Brent crude was trading 23 cents higher on the International Petroleum Exchange at $56.81 a barrel.
Prices remain about 50 percent higher than a year ago, but are still lower than the all-time inflation-adjusted high of $90 in 1980.
The possibility of a boost in production by the Organization of Petroleum Exporting Countries was floated this week by Kuwaiti Energy Minister Sheik Ahmed Fahd Al Ahmed Al Sabah, who is also the president of OPEC. He said if prices stay at current levels, OPEC will start consultations Friday on the possibility of increasing production by 500,000 barrels a day.
Any hike would be in addition to OPEC's decision last week to increase its production quota by 500,000 barrels a day.
At OPEC headquarters in Vienna, an official has said consultations would probably be made over the phone and that a decision was unlikely before next week.
Jonathan Copus of Investec securities in London said OPEC's message "is that something has to be done."
"But the market is not responding," he said, adding: "Prices are going to be strong for a while," particularly because increases in OPEC production now are doing little to ease concerns of shortfalls in third quarter, when demand is higher.
The U.S. Energy Information Administration, the statistics arm of the Department of Energy, on Wednesday reported a weekly draw in commercial supplies of crude oil and an increase in petroleum product stocks.
The report was seen as neutral for prices, which prompted traders to take profits on gains made during the past week.
"Resistance seems stronger than traders had anticipated, but the market still believes it's a matter of when and not if, the price will break through the $60 a barrel mark," said analyst Victor Shum of Texas-based energy consultants Purvin & Gertz in Singapore.
Analysts also are concerned that the build in distillate stocks, primarily because of a refinery logjam, will trigger a shortfall when demand peaks in the second half of 2005.
"It's about refining capacities as much as production," said Copus, suggesting that any additional production increase could strain refineries even further.
Concerns remain over the impact of a planned demonstration in Nigeria, the fifth-largest source of U.S. crude. A major ethnic organization in the southern part of the country said it was planning a three-day protest demanding a greater share of oil wealth for producing regions, and warned oil companies they should shut down during the rally.
Demonstrations could happen anytime within the next two weeks.