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Oil holds steady ahead of OPEC meet
Source: Agencies |
June 8, 2011, Wednesday
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OIL stayed around US$99 per barrel yesterday as investors awaited OPEC's response to the recent surge in fuel prices.
The 12-member Organization of Petroleum Exporting Countries will meet in Vienna today for the first time since a rash of anti-government uprisings swept through North Africa and the Middle East, threatening oil fields and halting Libya's crude production. Saudi Arabia and other OPEC members have cranked up oil operations to offset the loss of 1.5 million barrels of daily Libyan exports, but analysts say it hasn't been enough.
World demand has grown to more than 87 million barrels per day this year, the highest level ever recorded, and tighter global supplies have pushed prices 25 percent higher from January to April.
Analysts expect OPEC will increase production in an effort to cool off energy prices. If not, "they're just not recognizing the demands on this market," analyst Stephen Schork said.
Higher quotas would be largely symbolic since most OPEC countries already produce more than the daily allowance set by the organization. Still, it would be a signal to investors that OPEC, which supplies about 40 percent of the world's oil, is not comfortable with prices at current levels.
"There's a lot of people who are nervous ahead of those meetings," independent oil analyst Jim Ritterbusch said. After a slew of gloomy reports recently on gasoline demand, unemployment, consumer confidence, housing and manufacturing, oil investors are less confident that oil will rise in the short term, Ritterbusch said.
"You're seeing a big rush to the exits on the part of hedge funds," he said.
Benchmark crude for July delivery added 8 cents to settle at US$99.09 per barrel yesterday on the New York Mercantile Exchange.
Prices wavered throughout the day as investors got government and industry data with different readings on fuel demand in the US.
A weekly survey by MasterCard SpendingPulse said Americans have bought less gasoline for 11 weeks in a row, when compared to a year ago. The survey, which analyzes credit card receipts at thousands of service stations in the US, suggests that high prices have forced drivers to make fewer visits to the gas station and drive less.
However, the Energy Information Administration's monthly outlook said gasoline demand will recover by next year. EIA said Americans will burn an additional 3.4 million gallons per day in 2012.
"Motor gasoline is the fastest growing consumption category in 2012, reflecting growing population, rising employment and income," the government said in its Short Term Energy Outlook for June.
The government also said world oil demand will grow by 1.7 million barrels per day this year and by another 1.6 million barrels per day in 2012.
EIA releases its weekly report on the US petroleum inventories today. Analysts expect it to show that oil supplies shrank last week by 1.5 million barrels, while gasoline supplies grew by more than a million barrels.
In other Nymex trading for July contracts, heating oil rose 5.96 cents to settle at US$3.0770 per gallon and gasoline futures gained 4.2 cents to settle at US$2.9919 per gallon. Natural gas added less than a penny to settle at US$4.831 per 1,000 cubic feet.
In London, Brent crude, which influences the price of oil imported by refineries in the Northeast, rose after Goldman Sachs reported a decline in supplies from the North Sea, where Brent is produced. Brent rose US$2.30 to settle at US$116.78 per barrel on the ICE Futures exchange.
The 12-member Organization of Petroleum Exporting Countries will meet in Vienna today for the first time since a rash of anti-government uprisings swept through North Africa and the Middle East, threatening oil fields and halting Libya's crude production. Saudi Arabia and other OPEC members have cranked up oil operations to offset the loss of 1.5 million barrels of daily Libyan exports, but analysts say it hasn't been enough.
World demand has grown to more than 87 million barrels per day this year, the highest level ever recorded, and tighter global supplies have pushed prices 25 percent higher from January to April.
Analysts expect OPEC will increase production in an effort to cool off energy prices. If not, "they're just not recognizing the demands on this market," analyst Stephen Schork said.
Higher quotas would be largely symbolic since most OPEC countries already produce more than the daily allowance set by the organization. Still, it would be a signal to investors that OPEC, which supplies about 40 percent of the world's oil, is not comfortable with prices at current levels.
"There's a lot of people who are nervous ahead of those meetings," independent oil analyst Jim Ritterbusch said. After a slew of gloomy reports recently on gasoline demand, unemployment, consumer confidence, housing and manufacturing, oil investors are less confident that oil will rise in the short term, Ritterbusch said.
"You're seeing a big rush to the exits on the part of hedge funds," he said.
Benchmark crude for July delivery added 8 cents to settle at US$99.09 per barrel yesterday on the New York Mercantile Exchange.
Prices wavered throughout the day as investors got government and industry data with different readings on fuel demand in the US.
A weekly survey by MasterCard SpendingPulse said Americans have bought less gasoline for 11 weeks in a row, when compared to a year ago. The survey, which analyzes credit card receipts at thousands of service stations in the US, suggests that high prices have forced drivers to make fewer visits to the gas station and drive less.
However, the Energy Information Administration's monthly outlook said gasoline demand will recover by next year. EIA said Americans will burn an additional 3.4 million gallons per day in 2012.
"Motor gasoline is the fastest growing consumption category in 2012, reflecting growing population, rising employment and income," the government said in its Short Term Energy Outlook for June.
The government also said world oil demand will grow by 1.7 million barrels per day this year and by another 1.6 million barrels per day in 2012.
EIA releases its weekly report on the US petroleum inventories today. Analysts expect it to show that oil supplies shrank last week by 1.5 million barrels, while gasoline supplies grew by more than a million barrels.
In other Nymex trading for July contracts, heating oil rose 5.96 cents to settle at US$3.0770 per gallon and gasoline futures gained 4.2 cents to settle at US$2.9919 per gallon. Natural gas added less than a penny to settle at US$4.831 per 1,000 cubic feet.
In London, Brent crude, which influences the price of oil imported by refineries in the Northeast, rose after Goldman Sachs reported a decline in supplies from the North Sea, where Brent is produced. Brent rose US$2.30 to settle at US$116.78 per barrel on the ICE Futures exchange.
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