UPDATE 2-Oil up nearly $2 on U.S. natural gas draw
Thursday, January 6, 2005 4:17:34 PM
reuters.com
(updates throughout)
By Barbara Lewis
LONDON, Jan 6 (Reuters) - Oil prices rose nearly $2 on Thursday after a big fall in U.S. natural gas inventories triggered renewed concerns about winter fuel stocks in the world's biggest energy consuming nation.
U.S. light crude <CLc1> by 1615 GMT was up $1.71, gaining 4 percent, to $45.10 a barrel, the top of a $40-$45 trading range held since Dec. 22.
London Brent rose $1.99, up 5 percent, to $42.50 a barrel.
The U.S Energy Information Administration reported natural gas storage levels declined by 151 billion cubic feet (bcf) in the week ended Dec. 31.
That was higher than analysts' expectations of a draw of 135-140 billion cubic feet, which itself would have been much higher than five-year average draw of 118 bcf in this week.
"The number was bullish relative to consensus expectations," said Katherine Spector, analyst with JP Morgan Securities.
The draw cut the U.S. natgas supply surplus over last year to 3 percent, from last week's 9 percent, the EIA data showed.
The price rise comes after a spell of mild U.S. weather saw oil prices fall at the start of this week.
The latest 6 to 10 day forecast from the National Weather Service, released Wednesday showed temperatures unusually high in the eastern United States -- home to the main heating markets -- with cold in the west.
Prices fell one percent on Wednesday after a U.S. government report showed a two-million-barrel rise in the nation's stocks of distillate, including heating oil and diesel, in the final week of 2004 when use of heating fuel.
The counter-seasonal increase in winter fuel supplies came as U.S. refiners cranked up production to record levels and unseasonably mild temperatures kept heating demand at bay in the Northeast, the world's largest heating oil market.
But heating oil stocks are still nine percent lower than the same time a year ago, while escalating violence in oil producer Iraq ahead of elections at the end of the month, as well as OPEC production cuts have helped to staunch selling, analysts said.
"Fundamentals are on the weaker side but geopolitical factors are holding things up," said Edward Meir of Man Energy.
Producers' cartel the Organisation of the Petroleum Exporting Countries has tightened fundamentals by cutting back production after an agreement struck in December to remove one million bpd of excess supply from the world market from Jan. 1.
Top exporter Saudi Arabia said on Tuesday it had sliced 500,000 bpd from its production, bringing it down to 9 million bpd. Qatar said on Wednesday it had implemented a cut of 40,000 bpd.
OPEC is seeking to avoid a big build-up in global stocks ahead of the second quarter of the year, when oil demand drops at the end of winter.
Some OPEC ministers have said the group might need to cut formal production limits of 27 million bpd when it meets on Jan. 30 to stop prices falling further.
Speaking in New Delhi on Thursday, Iran's oil minister said there was still too much oil on the international market.
"No one is doubting it," Iranian Oil Minister Bijan Zanganeh said when asked if markets were oversupplied.
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