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News :: Economy |
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Oil Prices Rise Above $43; Dollar "Collapsing" |
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by AP via Joe Futrelle
Email: futrelle (nospam) shout.net (verified) |
06 Dec 2004
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LONDON (AP) -- Crude oil futures prices climbed back above $43 a barrel Monday on fears that OPEC may cut production to stem a recent price drop.
The rise in prices was also fueled by reports of attacks on the U.S. consulate in the Saudi city of Jiddah, ongoing production problems at Statoil's Snorre oilfield in the North Sea and a protest that shut down production on two oil platforms run by the Royal Dutch/Shell Group of Cos. and ChevronTexaco Corp. in Nigeria's southern oil region.
After a strong sell-off last week, benchmark light sweet crude rose 68 cents to $43.22 in electronic trading on the New York Mercantile Exchange.
In London, Brent for January delivery was up 63 cents to $39.99 on the International Petroleum Exchange.
Heating oil was up more than 2 cents at $1.2589 per gallon (3.8 liters) on the Nymex.
Analysts said the markets are bracing for a possible production cut when OPEC, the production cartel that has been pumping out crude at a record 30 million barrels daily since September, meets in Cairo on Friday.
``We have a huge amount of oil in the market and on the sea,'' Iran's Oil Minister Bijan Namdar Zanganeh told Dow Jones Newswires on Monday. ``OPEC really should be worried if it keeps on overproducing,'' he added, pushing for members to stick to its quotas.
World leaders are also concerned that the rapid rise of their currencies against the U.S. dollar will have a major impact on their sales, and ultimately on their purchasing power.
``OPEC needs to start cutting supply by 500,000 barrels a day now, and then cut again when the price reaches $35 a barrel,'' Libya's Oil Minister Fathi bin Shatwan said.
SG Securities in London said that Friday's meeting will be the perfect opportunity for OPEC to raise its average price band for a basket of oil products from the official but long-obsolete $22 per barrel to $28 per barrel.
The recent gains in oil prices -- the record for Nymex light crude was $55.17 in October -- have left that far behind.
``We expect OPEC to announce its new target band ... with a floor at $28 and a ceiling of $35 or higher, widening the target range,'' SG Securities said in a research note.
SG added that it expected OPEC to announce a 1 million barrel per day cut in quotas from March 1, bringing quotas to 26 million barrels per day to reflect the normal seasonal drop in demand.
In Nigeria, hundreds of local protesters besieged two oil platforms run by the Royal Dutch/Shell Group of Cos. and ChevronTexaco Corp. in the southern oil region, shutting down production of a total of 90,000 barrels of oil a day.
Statoil ASA has declined to say when it will resume production at its Snorre A platform after a gas leak last week, resulting in a loss of 205,000 barrels of oil a day in production.
Traders are also watching reports from Saudi Arabia, where a car bomb apparently exploded outside the heavily guarded U.S. consulate in the port city of Jiddah.
Despite the recent drop, the price of oil is still around 40 percent higher than a year ago, putting the greatest financial pressure on low-income families, chemical manufacturers and the airline industry.
``The dive in oil prices is welcome news for consumers. Producers have less to celebrate,'' said Eneryintel's Peter Kemp in a research note.
``That's not because they believe $50 oil is desirable or sustainable. It's because the value of the dollar is collapsing. The 35 percent decline of the U.S. currency against the euro over the past three years has hammered the purchasing power of OPEC producers.'' |
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