US crude fell sharply on Tuesday after Saudi Arabia poured cold water on the prospect of an immediate production cut by the Organisation of the Petroleum Exporting Countries in response to recent price weakness.
Nymex February West Texas Intermediate dropped $1.50 to $51.48 a barrel as US traders returned to the floor following the Martin Luther King holiday on Monday. US crude sank to a session low of $51.15, the lowest level since late May 2005.
ICE February Brent, which expired yesterday, fell 82 cents to $52.30 a barrel while the March contract sank $1.30 to $52.15.
Ali al-Naimi, Saudi Arabia's oil minister, said the measures already taken by Opec were working well as oil stocks had fallen and the market was moving closer to balance.
The comments from the cartel's most senior member come after pressure from other countries for more immediate action. On Monday, Venezuela proposed an emergency Opec meeting, saying global markets were oversupplied by up to 1m barrels a day.
It remains unclear just how much crude Opec has removed from the market as the cartel has agreed to reduce production by a total of 1.7m b/d but the second part of the cut is not due to start until February.
Traders said hedge funds and short-term momentum players would attempt to drag crude towards the $50 level, trying to test Opec's determination to defend prices at a higher level.
<http://www.bloomberg.com/apps/news?pid=20601081&sid=ap9i3C_FTkR4&refer=australia> Oil Falls to 19-Month Low on Saudi Rejection of More OPEC Cuts By Mark Shenk
Jan. 16 (Bloomberg) -- Crude oil in New York plunged to the lowest in more than 19 months after Saudi Arabia's oil minister rejected calls for more production cuts.
The Organization of Petroleum Exporting Countries must wait to assess the effect of supply curbs that start Feb. 1, the minister, Ali al-Naimi, told reporters in New Delhi. Prices have plunged 16 percent this year, leading Venezuela and Algeria to call for OPEC to restrain output.
``The Saudis don't see the need to take any immediate action, which just reinforces the bearish sentiment in the market,'' said Kyle Cooper, director of research at IAF Advisors in Houston. ``If the Saudis don't want OPEC to make further cuts it won't happen.''
Crude oil for February delivery fell $1.78, or 3.4 percent, to $51.21 a barrel on the New York Mercantile Exchange, the lowest close since May 26, 2005. Futures touched $50.53, the lowest intraday price since May 25, 2005. Prices are down 23 percent from a year ago. There was no floor trading in New York yesterday because of the Martin Luther King Jr. holiday.
Prices are down 35 percent from the record of $78.40 a barrel reached on July 14. The decline has accelerated during the past month because mild weather in the U.S. and Europe has curbed consumption of heating fuels.
Colder Weather
Below-normal temperatures will cover most of the U.S. from Jan. 21 through Jan. 25, the National Weather Service said yesterday. The Northeast, which accounts for 80 percent of the nation's heating-oil use, will be among the regions with colder weather.
Heating oil for February delivery fell 2.33 cents, or 1.6 percent, to $1.4803 a gallon in New York, the lowest close since May 31, 2005.
``Heating oil is a crude-oil product so you expect them to move in the same direction,'' said Eric Wittenauer, an energy analyst at A.G. Edwards & Sons Inc. in St. Louis. ``There's been a strong move in crude, and heating oil is following, even though it's cold. Also, because of the warm weather we've had there are substantial heating-oil stockpiles along the East Coast.''
Heating-oil inventories on the East Coast in the week ended Jan. 5 were 29 percent higher than a year earlier, an Energy Department report showed last week. A report from the department on Jan. 18 is expected to show that U.S. inventories of gasoline and distillate fuel, a category that includes heating oil and diesel, rose last week, a Bloomberg survey showed.
OPEC Agreements
OPEC, which produces about 40 percent of the world's oil, agreed last month in Abuja, Nigeria, to cut production by 500,000 barrels a day beginning Feb. 1. This comes on top of an agreement in Doha, Qatar, to cut output by 1.2 million barrels a day starting Nov. 1, 2006.
``There is actually no real need now'' for an extra output cut, al-Naimi told reporters at New Delhi's airport. ``All the fundamentals are significantly better than they were in Doha, and I believe in a very short time it is going to improve.''
Almost 100 million barrels were removed from the global oil market in the fourth quarter due to OPEC's Nov. 1 production cut, al-Naimi said today. That ``put the market closer to balance,'' he said.
``It's likely that the Saudis' major concern was high inventories and they now feel that OPEC has already succeeded in getting them under control,'' said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts.
Al-Naimi's appeal to wait until February echoed comments earlier today in New Delhi by Edmund Daukoru, oil minister of Nigeria, the group's sixth-largest supplier. Saudi Arabia is the group's biggest producer.
Saudi Arabian Cuts
``The Saudis have already made substantial cuts,'' Cooper said. ``It's the Venezuelans and Iranians that haven't. The Saudis probably want to see them do more before agreeing to anything new.''
Saudi Arabia crude-oil production fell an average 100,000 barrels a day to 8.7 million in December, the lowest since May 2004, according to a Bloomberg News survey. Venezuelan output rose an average 70,000 barrels a day to 2.51 million last month, the survey showed.
Venezuela is seeking a further output cut to boost sagging prices, Oil Minister Rafael Ramirez told reporters yesterday. Algeria would back a meeting to discuss larger reductions than the 500,000 barrels a day planned for Feb. 1, the country's oil minister, Chakib Khelil, told state-run Algerie Presse Service.
``There's been an argument for three decades between OPEC members with high populations and those with spare capacity,'' said Peter Beutel, president of Cameron Hanover Inc., a New Canaan, Connecticut, energy consultant. ``The populous countries such as Iran, Nigeria, and Venezuela have thought that Persian Gulf states should make most cuts.''
Oil in New York has dropped 28 percent in the past year when measured in euros, 31 percent in British pounds and 20 percent in yen.
Brent crude oil for February settlement declined 86 cents, or 1.6 percent, to close at $52.26 a barrel on the London-based ICE Futures exchange.
To contact the reporter on this story: Mark Shenk in New York at mshenk1 at bloomberg.net .
<http://www.nytimes.com/2007/01/17/business/worldbusiness/17opec.html> January 17, 2007 Saudi Dismisses Call for an OPEC Meeting By JAD MOUAWAD
Saudi Arabia's oil minister said yesterday that he saw no reason for OPEC to hold an emergency meeting in response to declining prices, quelling speculation that the cartel would take fresh steps to stem a 16 percent decline in prices since the beginning of the year.
OPEC producers like Venezuela and Algeria, worried about falling revenue, have been calling for a meeting to consider additional production cuts ahead of the next scheduled gathering on March 15.
-- Yoshie <http://montages.blogspot.com/> <http://mrzine.org> <http://monthlyreview.org/>