Oil Weaker Ahead of U.S. Inventory Data ($43.52/bbl)

Reuters ^ | January 5, 2005

[RWR8189]

SINGAPORE (Reuters) - Oil traded lower on Wednesday ahead of key U.S. stocks data, which was expected to show a rise in heating fuel supplies as mild winter temperatures suppressed demand in the United States.

U.S. light crude (CLc1: Quote, Profile, Research) fell 26 cents to $43.65 a barrel. Prices are broadly on par with levels at the end of 2004 following sharp swings in the first two trading days this year.

London's Brent crude (LCOc1: Quote, Profile, Research) slipped 31 cents to $40.73 a barrel.

The U.S. government Energy Information Administration (EIA) will release its weekly report at 10:30 a.m. EST.

Analysts polled by Reuters predicted distillate inventories, including heating oil and diesel, would rise by 160,000 barrels in the week to Dec. 31.

"It really hasn't been a very cold winter and that will hurt short-term demand," said Tony Nunan at Mitsubishi Corp. in Tokyo. "If today's stats are bearish we'll go down, but $40 to $45 continues to be a good range," he said.

Top exporter Saudi Arabia said on Tuesday it had sliced 500,000 barrels per day (bpd) from its production, bringing it down to nine million bpd. The move is in line with OPEC's accord in December to withdraw 1 million bpd of excess supply from the world market.

"We took off the 500, we're around nine," Saudi Oil Minister Ali al-Naimi told Reuters on his arrival for a meeting with Asian oil consumers in New Delhi.

The Organization of the Petroleum Exporting Countries wants to avoid a big build-up in global stocks ahead of the second quarter when oil demand drops at the end of winter.

Oil prices have fallen nearly $12 a barrel from record highs above $55 in late October. Some OPEC ministers have said the group might need to cut formal production limits of 27 million bpd when the cartel meets on Jan. 30 to stop prices falling further.

Escalating violence in Iraq ahead of elections at the end of the month also supported oil prices. Its crude exports via a second, northern route via Turkey have been stopped since December following sabotage on the pipeline, which can carry 500,000 bpd. Liftings from Iraq's Gulf ports continue.

The market has also seen a succession of supply hitches in North America and Europe.

About 145,000 bpd of crude output still remains closed in the U.S. Gulf of Mexico following September's Hurricane Ivan, and two oilfields with combined production of 205,000 bpd are also still closed in the Norwegian North Sea after a gas leak in November.

Canadian company Suncor Energy Inc. (SU.TO: Quote, Profile, Research) said on Tuesday a fire shut more than 100,000 bpd of production at its oil sands facility in Alberta.

[RWR8189]

1/05/05 Session Contract Detail for February 2005

	Last				43.52
	Open High				0.00
	Open Low				0.00
	High				43.90
	Low				43.51
	Settle				43.91
	Change				-0.39
	Open Interest				165451
	Volume				0
	Last Updated				1/05/05 04:21:46

[leadpenny]

$1.599 for regular at Exxon in Lake Ridge, VA this morning. Has dropped around 10 cents in the last month or so.

[quant5]

"It really hasn't been a very cold winter and that will hurt short-term demand," said Tony Nunan at Mitsubishi Corp. in Tokyo. "If today's stats are bearish we'll go down, but $40 to $45 continues to be a good range," he said."

This statement of the $40-$45 range seems to be true. It jumped $2 because it "might be cold in the Northeast next week?" Come on, I think that oil was simply underpriced for 10 years. Companies need to make profit or why be in business? Oil is no different then widgets. Seems $40-$45 range is a modest tolerence for American consumer pain and the oil producing/refining companies profits. I'll be a speculator and guess that this PPB of oil won't go below $35 in our lifetimes from here on out.