Oil above $58 on US stocks, capped by OPEC
Analysts are saying the reaction has been muted by the fact that inventories remain about 18 per cent higher than a year ago.india Updated: Oct 13, 2006 14:11 IST
Oil prices extended their rebound from a 2006 low on Friday, after a surprise fall in US winter fuel stocks, although gains were checked by a big rise in crude inventories and OPEC's dithering over an output cut.
US crude rose 33 cents to $58.19 a barrel as of 0606 GMT, extending a 27-cent gain on Thursday, when prices touched $57.22, their lowest level since December 19, 2005. London Brent crude climbed 23 cents to $58.99.
Price rallied after US government data on Thursday showed distillate stocks, including heating oil, fell by 1.6 million barrels last week, contrary to forecasts for a small rise.
But analysts said the reaction was muted by the fact that inventories remain about 18 per cent higher than a year ago and that crude stocks climbed by a hefty 2.4 million barrels.
"The impact has been modest because inventory levels are much more comfortable now than they have been for a while," said Tobin Gorey, commodity strategist at Commonwealth Bank of Australia.
Distillate demand has already been sapped by warm autumn weather and US government forecasters said this week they expected warmer-than-average temperatures across much of the world's top oil consuming nation for the winter season.
Analysts said oil may stay under pressure until OPEC, source of over a third of the world's oil, formally moves to cut supply, ending over a week of deliberation over the details of an expected 1 million barrel per day reduction.
"Less production will affect the oil price but OPEC still looks like a group who might not deliver the cut," said Gorey.
OPEC ministers have disagreed on whether to make a reduction from their notional 28 million-bpd production ceiling or from actual supply of nearer 27.5 million bpd in September.
The group was also divided over whether they should meet ahead of a scheduled gathering on December 14 in Nigeria to formalize what would be OPEC's first output cut since 2004.
A source familiar with the situation said on Thursday OPEC was considering holding a meeting in Vienna in early November.
US Energy Secretary Sam Bodman said major non-OPEC oil producers could replace any crude supplies OPEC cuts and pick up market share in the process.
BP Plc said on Thursday oil production in the US' largest oil field Prudhoe Bay in Alaska had risen to 50,000 bpd as it worked to restore normal operations following a power failure.
It also said it expects output from the field, which has a capacity of 400,000 bpd, to return to normal within a few days.