Oil holds strong as Kuwait delays capacity hike
Thursday, November 4, 2004 12:12:26 PM
reuters.com
(Updates throughout, previous SINGAPORE)
LONDON, Nov 4 (Reuters) - Oil prices held near $51 a barrel on Thursday as OPEC member Kuwait delayed a planned increase in its production, potentially prolonging a global shortage of spare supply capacity that has sent prices to record highs.
U.S. light crude <CLc1> eased 18 cents to $50.70 a barrel. London Brent <LCOc1> was down 16 cents at $47.40.
President George W. Bush's election victory pushed prices up $1 on Wednesday, ending a week-long downturn that had pulled prices down more than $5 from record highs.
A second Bush administration will likely continue filling U.S. emergency oil stockpiles despite high prices and could stoke nerves about U.S. policy in the Middle East, particularly OPEC's second-biggest producer Iran.
Prices held strong as a Kuwaiti oil official said the major Gulf OPEC producer Kuwait has delayed a 200,000 barrels per day (bpd) increase in its crude oil production capacity until late December or early January.
The delay is a blow to the OPEC cartel's efforts to alleviate a lack of spare production capacity, which has helped drive oil prices to record highs.
OPEC has lifted production above 30 million bpd to meet booming oil demand -- leaving it about 1.5 million bpd of spare capacity, all in top world exporter Saudi Arabia.
OPEC's supply surge has helped rebuild U.S. crude stocks, which have risen 10 million barrels in the last two weeks.
This has helped assuage supply concerns that have plagued the market since September's Hurricane Ivan, which knocked more than a quarter U.S. Gulf of Mexico production out of commission for weeks.
INVENTORIES
"Oil inventories should rise over the next six to nine months and this should eventually ease the extreme tightness in today's oil markets," said Adam Sieminski of Deutsche Bank in a report.
"The main forces that we believe will cause prices to fall include weakening global oil demand, rising non-OPEC supply, and growth in both OPEC production and capacity to produce."
Even so seasonal maintenance at U.S. refineries has hampered the usual autumn build of distillates, including heating oil for winter.
Heating oil inventories are 16 percent below this time last year, although many analysts expect them to be replenished quickly as refiners ramp up throughput following maintenance closures.
Forecasters said on Wednesday heating fuel demand in the eastern United States were likely to be higher than last year due to a colder-than-normal winter from November to March.
U.S. demand for distillates, which include diesel and jet fuel as well as heating oil, is already running eight percent above year-ago levels.
In Japan, another major heating fuel user, kerosene supplies are 11.5 percent below this time last year, industry data released on Thursday show.
Oil demand growth is expected to slow next year as high prices begin to eat into global economic growth. The International Energy Agency's chief economist said on Wednesday that some nations might face recession due to high energy costs. |
