Oil Rises After Fire Reported at Chevron Refinery in California
By Eduard Gismatullin
Jan. 15 (Bloomberg) -- Crude oil rose after a fire was reported at Chevron Corp.'s refinery in Richmond, California.
The fire at the refinery was under control, KCRA-TV reported. Local residents were told to stay indoors, the television station said. Oil is also gaining on speculation that the Organization of Petroleum Exporting Countries may further cut production to halt falling prices.
``If mild weather continues, refineries will produce less heating fuel and therefore ask for less crude,'' said Andy Sommer, an analyst at HSH Nordbank AG in Hamburg. ``This can lead to a situation that OPEC says: Let's cut another 500,000 barrels a day in order to balance supply-demand.''
Crude oil for February delivery gained as much as 56 cents, or 1.1 percent, to $53.55 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It traded at $53.35 at 3:13 p.m. London time. The Nymex trading floor will be closed today for the Martin Luther King Jr. holiday. Electronic trading will continue.
Brent crude oil for February settlement rose 61 cents to $53.56 a barrel. The contract expires tomorrow. The more-active March contract increased 49 cents to $53.93 on the ICE Futures exchange in London.
Algeria would back a meeting by OPEC, which pumps about 40 percent of world's oil, to discuss larger reductions than the 500,000 barrels planned for Feb. 1, the country's oil minister, Chakib Khelil, told the state-run Algerie Presse Service.
``It's too early to say if there's an agreement'' on an emergency meeting of OPEC, said Shokri Ghanem, the head of Libya's National Oil Corp. Kuwait wouldn't support such a meeting, the country's oil minister, Ali Jarrah al-Sabah, said today, according to the state-run Kuwait News Agency, although ``everything is possible and depends on the market's circumstances.''
Demand Dropping
U.S. fuel demand fell earlier this month to its lowest in almost three years, the Energy Department reported on Jan. 10. Temperatures in the country were milder than normal through the first part of winter. New York had its third-warmest December on record, according to the U.S. National Weather Service.
Temperatures in the U.S. since September have been 8 percent warmer than the 50-year average and 2 percent warmer than last year, Gilbert Yang, an analyst at Citigroup Global Markets, wrote in a report.
Oil was pushed lower after reports Iraq may award a contract today to an international oil company to buy 3 million to 4 million barrels of crude it has stored in the Turkish port of Ceyhan, an Iraqi oil ministry official said. Iraq has 4 million barrels of Kirkuk oil in storage at Ceyhan.
Prices Falling
In U.S. dollars, the price of U.S. benchmark crude, called West Texas Intermediate, has fallen about 13 percent this year, as warm weather in the northeastern U.S., the region that consumes four-fifths of the heating oil the country uses, curbed demand. It fell about 20 percent in U.S. dollars in the past 12 months.
In euros, the price of oil has fallen about 25 percent in a year. In yen, it's fallen 17 percent and in British pounds 28 percent.
Crude oil may fall toward $50 a barrel as plunging U.S. fuel consumption bolsters stockpiles in the world's biggest energy consumer, a Bloomberg News survey forecast last week.
``News of high reserves in the short term has more of an impact on oil markets than statements from OPEC about intentions to cut production,'' said Jacopo Ceccatelli, an economist at JC Associati in Milan. ``Given the mild winter weather we have seen in Europe, I expect oil prices to continue to decline.''
Long Positions
Hedge-fund managers and other large speculators switched from a net-long position to net-short in New York crude futures in the week ended Jan. 9, according to the U.S. Commodity Futures Trading Commission. That means bets prices will rise outnumber bets they'll fall. Short positions outnumbered long positions by 22,358 contracts, the largest volume since last February. Last week, traders were net-long 2,194 contracts.
The commission's ``data also reveal that tactical investors assumed a more bearish stance towards the entire energy complex,'' analysts at Barclays Capital in London, including Kevin Norrish and Sudakshina Unnikrishnan, wrote today in a report.
OPEC oil ministers are in ``consultations'' on the recent price drop, Algeria's Khelil said, according to the APS report. It didn't say whether the group would hold an emergency meeting.
Production Cuts
OPEC has announced two cuts since October, one of 1.2 million barrels, to take effect last November, and another of 500,000 barrels, to take effect in February. The 10 OPEC members with production quotas pumped 385,000 barrels a day more oil last month than they had agreed to, according to Bloomberg data.
``Overall, the chances of full compliance, especially if they bring another oil cut, I would speculate, it's not going to happen,'' said Neil McMahon, a London-based analyst at Sanford C. Bernstein & Co.
OPEC's basket price, a weighted average of 11 blends produced by OPEC nations, fell 48 cents to $48.65 a barrel on Jan. 12, the lowest since May 2005.
``OPEC is keen to have an oil price of about $55-$60 in order to finance its extensive investment program,'' HSH Nordbank's Sommer said.
The group is next scheduled to meet on March 15. Oil prices have fallen 15 percent since OPEC agreed to the February cut last month.
Several OPEC oil ministers are likely to meet informally this week at the Petrotech-2007 oil industry conference in New Delhi, which starts today and runs until Jan. 19. Oil ministers Ali al-Naimi of Saudi Arabia, Kazem Vaziri-Hamaneh of Iran, Edmund Daukoru of Nigeria and Abdullah bin Hamad al-Attiyah of Qatar are expected to attend.
To contact the reporter on this story: Eduard Gismatullin in London at egismatullin@bloomberg.net
Last Updated: January 15, 2007 10:24 EST |
