Oil Surges as OPEC Minister Forecasts 4th Quarter Demand Growth
May 2 (Bloomberg) -- Crude oil rose more than $1 a barrel in New York after Algeria's energy minister Chakib Khelil said that that global fuel demand remains ``very strong.''
Supply may not be sufficient to meet demand in the fourth quarter, which is when consumption peaks, Khelil said in an interview in Washington. The producer group has between 1 and 2 million barrels a day of spare production capacity and would need perhaps 4 million to provide a cushion that would keep prices in check, Khelil said.
``With OPEC close to capacity it is hard to see how they can increase production when it's needed,'' said Phil Flynn, vice president of risk management with Alaron Trading Corp. in Chicago. ``If there is any disruption we will see prices soar.''
Crude oil for June delivery rose $1.20, or 2.4 percent, to close at $50.92 a barrel on the New York Mercantile Exchange. Futures touched $49.03 in early trading, the lowest since Feb. 22. Prices are up 36 percent from a year ago.
Oil in New York has declined 13 percent since reaching $58.28 a barrel on April 4, the highest since the contract began in 1983.
``The dramatic sell-off last week brought in the value buyers,'' said John Kilduff, senior vice president of energy risk management with Fimat USA Inc. in New York. ``The upsurge in violence over the weekend didn't help either; it's bringing back some of the security premium.''
There was no trading of Brent crude oil futures on the International Petroleum Exchange in London because of the May Day holiday.
OPEC Quota
The 11-member group agreed at a March 16 meting in Isfahan, Iran, to boost oil-production quotas by 500,000 barrels a day to 27.5 million barrels a day. The group also pledged to add another 500,000 barrels as early as May should prices continue to rise. The group has not implemented the second increase. OPEC's next meeting is June 15 in Vienna.
``My point of view is that OPEC should, because of the tremendous demand in the fourth quarter, build up inventories to meet that demand,'' Khelil said.
World oil consumption will rise 2.1 percent this year to 84.27 million barrels a day, the International Energy Agency said last month. Demand grew 3.4 percent last year, the fastest pace in a quarter-century.
To contact the reporter on this story:
Mark Shenk in New York at mshenk1@bloomberg.net.
Last Updated: May 2, 2005 15:38 EDT |
