Europe
Oil Rises a Third Day as OPEC May Fail to Meet 2nd-Half Demand
May 6 (Bloomberg) -- Crude oil rose for the third day in New York on speculation OPEC and other producers may struggle to meet peak demand in the second half of the year when refiners increase output of heating fuel before the winter.
The extra oil that producers can pump has ``decreased to dangerously low levels,'' Merrill Lynch & Co. strategist Francisco Blanch said in a report this week. OPEC's crude-oil production in April rose 0.9 percent to 30.07 million barrels a day, close to a 26-year high, a Bloomberg survey showed.
``If OPEC is having difficulties meeting current world demand during an off-peak demand period, will they be able to produce enough supply during the higher demand periods later this year?'' said Alan Herbst, a principal at New York-based Utilis Energy LLC, an energy-consulting firm. ``Traders have begun to focus their attention on the ability of U.S. refineries to produce enough heating oil.''
Crude oil for June delivery rose as much as 63 cents, or 1.2 percent, to $51.46 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $51.30 at 11:13 a.m. Singapore time. Oil for October delivery cost $2.80 a barrel more than the June contract.
Yesterday, oil for June rose 70 cents, or 1.4 percent, to $50.83 a barrel, the highest closing price since April 28. Futures have declined 12 percent since reaching $58.28 a barrel on April 4, the highest since the contract began in 1983.
World oil demand will rise 2.1 percent this year, with most of the increase in China and the U.S., the International Energy Agency, an adviser to 26 industrialized nations, said April 12. Daily demand will peak in the fourth quarter at 86.1 million barrels, the Paris-based agency said.
`Run Faster'
Saudi Arabia, the world's top oil exporter, increased oil output by 110,000 barrels, or 1.2 percent, to 9.45 million barrels a day in April, according to a May 3 Bloomberg survey. That's close to Saudi Arabia's oil minister Ali al-Naimi April 21 output estimate of 9.5 million barrels of a day. The country has additional capacity to pump another 1.5 million more barrels a day, he said.
``Asking the Saudis to pump more oil is like asking an athlete who runs at full speed to run faster -- the only way he can do it is by taking drugs,'' said Gal Luft, executive director of the Washington-based Institute for the Analysis of Global Security. ``Without the necessary infrastructure, the Saudis will be forced to pump huge amounts of water into their wells to increase reservoir pressure. This could devastate the geological formations and lead to many problems down the line.''
The Organization of Petroleum Exporting Countries, which pumps about 40 percent of the world's oil, raised its production quota in March to help lower prices and swell global stockpiles before the fourth quarter.
OPEC
Including Iraq, which is not restricted by a quota, the group produced 30.1 million barrels a day last month, according to the survey of oil companies, producers and analysts. In October, OPEC pumped 30.54 million barrels a day, the highest since 1979, based on U.S. Energy Department records.
OPEC has no more than 1 million to 2 million barrels per day that could be pumped, Algerian Oil Minister Chakib Khelil said on April 27.
Concern that spare capacity may not be enough to cover supply disruptions caused by sabotage, labor or civil unrest in producers including Iraq, Venezuela and Nigeria helped send prices to their April 4 record of $58.28 a barrel.
On May 4, Venezuela's highest-ranking opposition deputy of the energy commission said state-run Petroleos de Venezuela SA President Rafael Ramirez should be fired for letting the company slip into ``anarchy,'' resulting in a drop in oil production.
Deputy Julio Montoya's call for the firing of Ramirez, 41, came a day after President Hugo Chavez said that mismanagement at Petroleos de Venezuela had caused the country's oil production to drop.
Venezuela
``Given the age of Venezuela's oil fields it is unlikely that Chavez can increase capacity much more,'' said Marshall Auerback, an international portfolio strategist who manages $450 million in stocks and bonds at U.S. Virgin Islands-based investment adviser David W. Tice & Associates. ``It's also worth noting that Venezuelan fields are mature and Venezuelan crude is heavy.''
Rising demand for transportation fuels and rules that call for lower levels of sulfur have increased demand for West Texas Intermediate and other crude oil grades which are easiest to turn into gasoline. These are trading at a premium to the more abundant heavy, high-sulfur grades, Merrill's Blanch said.
To contact the reporters on this story:
Sri Jegarajah in Singapore at sjegarajah@bloomberg.net;
Gavin Evans in Wellington, New Zealand at gavinevans@bloomberg.net.
Last Updated: May 5, 2005 23:39 EDT |
