Oil Prices Slip as US Winter Stocks Seen Rising
Date: 01-Dec-04
Country: USA
New York crude futures settled down 63 cents to $49.13 a barrel, reversing an earlier rally that had brought prices over $50 on production problems from oil fields in the North Sea and eastern Canada.
London Brent crude fell 24 cents to $45.48 a barrel.
The losses near the end of the open call session in New York came as analysts anticipated a government report would show the second straight weekly increase in US distillates supplies, which include heating oil and diesel.
Such an increase would help the world's largest energy consumer to whittle down a 16 percent year-on-year heating oil inventory deficit ahead of peak demand.
The report from the Energy Information Administration to be released Wednesday is expected to show overall US distillate inventories rose by 1.4 million barrels in the week to Nov. 26, helped by recent mild weather in the Northeast that has capped consumption, a Reuters survey of 12 analysts showed.
Even with that build, distillate stocks would remain well below last year and forecasts for colder-than-usual weather in the months ahead are keeping the market on edge.
"Winter will play a big part," said analyst Kevin Norrish of Barclays Capital. "Let's face it, we have not yet reached the seasonal peak for winter demand."
Prices have risen by around 50 percent since January and are less than $7 off a record high hit in late October, buoyed by fears that fuel stocks are too low in the US as well as key consumers in Asia and Europe.
Earlier in the day, New York oil futures hit as high as $50.40 a barrel, underscoring the market's jitters.
More than 280,000 barrels per day (bpd) of North Sea oil production remained halted on Tuesday after two separate gas leaks shut fields in the Norwegian and UK sectors.
Meanwhile, Canada's 160,000 bpd Terra Nova field in the Atlantic was idled during a government probe into a recent crude oil spill.
The OECD said on Tuesday that soaring oil prices dealt a blow to the global economy in recent months but the growth should rebound next year.
"Despite recent oil price turbulence the world economy will regain momentum in a not-too-distant future," OECD chief economist Jean-Philippe Cotis said.
The world could and would have to learn to live with more expensive oil because of soaring demand from booming emerging market economies such as China, Cotis said.
Oil at $40 would not inflict much damage on economic growth but a sustained run at $50 could do lasting harm, he said.
OPEC SIZES UP WINTER
OPEC has been producing near full capacity, at the highest level in 25 years, and the production surge is steadily building crude inventories in consuming nations.
Saudi Oil Minister Ali al-Naimi said on Monday that while global stocks of petroleum products such as heating oil remained below par, inventories were rebuilding and crude output was running slightly ahead of demand.
The dollar's fall to record lows last week has also raised unease in OPEC nations as their petro-dollar revenues will be worth less in the eurozone and Asia.
OPEC's second largest producer Iran believes OPEC should crack down on excess output over self-imposed quotas when ministers meet in Cairo on Dec 10.
Other OPEC members are generally reluctant to advocate an output cut but that could change as any stock build gathers momentum early next year, analysts said.
