Oil Trades Near $96 After Rising on OPEC Outlook, Refinery Fire
By Christian Schmollinger and Nesa Subrahmaniyan
Feb. 19 (Bloomberg) -- Crude oil traded near $96 a barrel in New York after rising yesterday on speculation OPEC will curb production and refinery disruptions will limit fuel supplies.
The Organization of Petroleum Exporting Countries, due to meet March 5, may cut production as winter heating demand wanes, oil ministers from Algeria and Iran said the past week. Gasoline jumped as much as 1.3 percent yesterday after an explosion shut Alon USA Energy Inc.'s Big Spring refinery in Texas.
``OPEC wants to hold the price at a high level,'' said Tetsu Emori, a fund manager at Astmax Ltd. in Tokyo. ``They keep saying that the demand in the second quarter will fall further so they need to make a production cut. They don't care about the supply and demand balance.''
Crude oil for March delivery was at $96.34 a barrel, up 84 cents from the Feb. 15 close, in after-hours electronic trading on the New York Mercantile Exchange at 1:03 p.m. in Singapore. Floor trading on the exchange was closed yesterday for the Presidents' Day holiday.
Oil gained as much as 1 percent to $96.45 yesterday before closing at $95.89. Those trades will be booked today for settlement purposes because of the U.S. holiday.
OPEC pumps about 40 percent of the world's oil. The group lowered its 2008 oil demand growth forecast to 1.4 percent last week, citing the risk of recession in the U.S. It is also projecting a 1.6 million-barrel reduction in daily demand in the second quarter as heating demand wanes.
Lower Consumption
``OPEC is certainly not going to let any supply surplus develop,'' said David Moore, the commodity strategist at Commonwealth Bank of Australia Ltd. in Sydney. ``The oil market, particularly on the refinery side, has just been beset by problems.''
OPEC won't increase production as demand may drop by 1.8 million barrels a day in the second quarter, because of the U.S. economic slowdown, refinery shutdowns for maintenance and lower fuel consumption as winter comes to an end, Chakib Khelil, the group's president said on Feb. 13.
``Oil markets are really more concerned about growth in China and India as well as the prospect for further supply cuts, rather than concerns about the U.S. economy,'' said Gerard Burg, a minerals and energy economist at National Australia Bank Ltd. in Melbourne. ``Growth in demand has really been driven by Asia.''
Brent crude for April settlement was at $95.05 a barrel, up 14 cents, on London's ICE Futures Europe exchange at 12:55 p.m. Singapore time. The contract rose 28 cents, or 0.3 percent, to $94.91 a barrel yesterday.
The North Sea Sullom Voe terminal in Scotland's Shetland Islands resumed normal operations yesterday after berthing was halted for a day because of high winds. Berthing has stopped at least 12 times this year because of high seas.
Blast Boosts Gasoline
Gasoline for March delivery was at $2.53 a gallon in New York, up 1 percent from last week's close. The contract gained after the blast at the Alon plant yesterday.
The fire in part of the 70,000 barrel-a-day refinery has been contained and the company doesn't yet know the cause of the blast, Alon Spokesman Blake Lewis said in a telephone interview.
``Refineries are either in maintenance or starting to ramp up gasoline production,'' National Australia's Burg said. ``Any outage at this time is going to influence gas markets.''
Gasoline demand in the U.S., the world's largest oil consumer, usually peaks June through August as summer vacation travel puts more cars on the nation's roads. U.S. stockpiles have risen for 14 weeks and held 229.2 million barrels on Feb. 8, a nine-year high.
Prices Rebound
Oil prices jumped 4.1 percent last week after economic reports out of China and Japan suggested Asian demand for commodities may remain strong.
New York oil futures reached a record $100.09 a barrel on Jan. 3. Prices dropped as low as $86.24 this month as U.S. oil and gasoline stockpiles rose amid concern that a recession in the world's largest energy consumer will hurt demand.
Rising stockpiles and declining heating demand should allow oil prices to ease to an average $83 a barrel in the second quarter from $91.66 in the first, National Australia forecasts.
``But that said, if we see a cut in OPEC supply, or if we see a situation where there is a major disruption to supply elsewhere, that would obviously lead to prices being driven higher again,'' Burg said.
