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Oil Market Underestimated Supply Limits, Barclays Capital Says

By Mathew Carr

Oct. 5 (Bloomberg) -- Crude-oil traders who sold the commodity below $60 a barrel underestimated potential supply constraints from OPEC and producers like Iran and Nigeria, a Barclays Capital research analyst said.

``I think the market's taken the eye off the ball,'' Kevin Norrish, Barclays Capital's director of commodities research, said today at a London meeting with reporters. Traders had focused too much on high levels of inventories as oil plunged from more than $78 in July, he said.

Norrish spoke as oil jumped almost 3 percent, rising from a seven-month low and surpassing $60 a barrel, on speculation that the Organization of Petroleum Exporting Countries will cut output. Barclays has a fourth-quarter oil forecast of $71.90 a barrel.

Iran may curb oil exports as it negotiates over use of nuclear energy. ``There's a strong likelihood it will play the oil card'' before the end of next year, Norrish said. ``The downside is really pretty limited.''

Barclays forecasts prices will reach $80.20 a barrel in the third quarter of next year and $93 in 2015, according to a Oct. 2 research note.

OPEC will reduce supply by 1 million barrels a day, with Saudi Arabia, the group's largest exporter, cutting 300,000 barrels, Reuters reported, citing an unidentified group delegate. Kuwait's oil minister said there is ``no agreement'' to reduce output. A Qatari oil ministry official who asked not to be identified said he had not been contacted about cuts.

Crude oil for November delivery rose as much as $1.56, or 2.6 percent, to $60.97 a barrel in after-hours electronic trading on the New York Mercantile Exchange. The contract traded at $60.65 at 2:47 p.m. London time.

To contact the reporter on this story: Mathew Carr in London at [e-mail]