Oil $62.30 May Rise as OPEC Considers Cuts to Bolster Prices (Update1)
By Mark Shenk
Sept. 29 (Bloomberg) -- Crude oil may rise on speculation members of the Organization of Petroleum Exporting Countries will join Nigeria and reduce output to counter a 20 percent decline in prices during the past two months.
Seventeen of 42 analysts, traders and brokers, or 40 percent, said prices will rise next week, according to a Bloomberg News survey. Fourteen forecast prices will fall and 11 predicted little change. A week ago, 56 percent of respondents said futures would decline.
Nigeria will cut exports 5 percent next month, the Nigerian National Petroleum Corp. announced yesterday. OPEC members are cutting output on a ``voluntary basis,'' acting Secretary- General Mohammed Barkindo said yesterday. Oil has plunged because of higher U.S. fuel supplies and reduced concern that conflict will disrupt Middle East shipments.
``OPEC has made some hawkish comments over the last week, which shows a commitment by them to protect the price,'' said Katherine Spector, an energy strategist at JPMorgan Chase & Co. in New York.
Crude oil for November delivery has risen $1.80, or 3 percent, so far this week to trade at $62.35 a barrel today on the New York Mercantile Exchange at 8:23 a.m. London time
Futures are down 5.9 percent from a year ago. Oil reached a record $78.40 a barrel on July 14 on concern that fighting in Lebanon between Israel and Islamic militia Hezbollah would spread through the Middle East.
The 11 members of OPEC, which produce about 40 percent of world oil, kept their output target at 28 million barrels a day at their Sept. 11 meeting. Ministers from Nigeria, Iran and Algeria said they were concerned about falling prices. OPEC's next scheduled meeting is on Dec. 14 in Abuja, Nigeria.
Nigeria's Output
Nigeria pumped 2.2 million barrels of oil a day in August, making it OPEC's-sixth biggest producer, according to a Bloomberg News survey of companies, producers and analysts. Nigeria was the fifth-biggest source of U.S. oil imports during the first seven months of 2006, Energy Department figures show.
Still, OPEC isn't considering an emergency meeting over the current oil price because ``prices are still at a good level,'' Saudi Oil Minister Ali al-Naimi told reporters at an energy and environment conference in Riyadh on Sept. 19. Saudi Arabia is the world's biggest oil exporter.
``A cut by OPEC depends on the Saudi position once WTI's current-month price approaches the mid-$50s a barrel,'' said Mordechai Abir, director of energy research at Burnham Securities Inc. in New York. ``To the best of my knowledge this would still provide Riyadh with sufficient revenue.''
West Texas Intermediate, or WTI, crude oil is the U.S. benchmark and can be delivered against New York futures.
Speculators Buy
Prices surged the most in six months on Sept. 27, as speculators who had sold contracts in a bet that prices would fall bought them back when futures failed to break through $60 a barrel in New York.
``After plunging from the peaks above $70, oil has settled into a trading band of within the low- to mid-$60s,'' said Gerard Burg, energy and minerals economist at National Australia Bank Ltd. in Melbourne. ``Without a clear direction from market fundamentals or external factors, crude prices are likely to fluctuate within this range until seasonal demand recovers toward winter.''
Global fuel consumption peaks during the Northern Hemisphere winter, when homeowners and businesses purchase heating oil.
Supplies of distillate fuel, a category that includes heating oil, were 22 percent higher last week than the five-year average for the period, the U.S. Energy Department said on Sept. 27. Crude oil inventories were up 12 percent and gasoline stockpiles are up 6.3 percent from the average.
Prices May Fall
``Both crude and product fundamentals are outright bearish,'' said Antonio Szabo, chief executive officer of Houston-based consultant Stone Bond Technologies. ``Crude prices should fall. In fact our belief is that they are heading to $58 a barrel in the near future, perhaps even next week.''
Talks yesterday between Iran and the European Union aimed at breaking the deadlock over Iran's atomic program produced some progress, the country's chief nuclear negotiator Ali Larijani said. Iran has the second-biggest proved oil reserves and almost a quarter of the world's oil flows through the Strait of Hormuz, a narrow waterway between Iran and Oman.
Oil should ``decline to the $50s a barrel,'' Burnham's Abir said. ``Weather was disappointing to price hawks and the Iran conflict is and was never serious. Demand is slowly declining while global proven production capacity, including that of Saudi Arabia, is gradually increasing.''
Oil platforms in the Gulf of Mexico have escaped damage this Atlantic hurricane season. Last year all platforms were shut when Hurricane Rita moved through the Gulf. The Atlantic hurricane season runs from June through November.
The survey has correctly predicted the direction of prices 52 percent of the time since it was introduced.
Bloomberg's survey of oil analysts and traders, conducted
each Thursday, asks for an assessment of whether crude oil
futures are likely to rise, fall or remain neutral in the coming
week. The results were:
RISE NEUTRAL FALL
17 11 14
Know how to make God laugh?
Tell Her your plans ....
