LONDON, 19 March 2004 — Oil prices fell yesterday as dealers cashed-in a day after US crude oil prices recorded their highest close in 13 years.
The price of Brent North Sea crude oil for May delivery, the new benchmark contract, fell 30 cents to $33.23 per barrel here in late deals.
New York’s reference light sweet crude April contract lost 26 cents to $37.92 a barrel in early trading. “We may have gone up a bit too high too quickly yesterday,” GNI-Man Financial analyst, Lee Elliott, said yesterday. “It was overdone on the upside and we are seeing some profits-taking now,” he added.
On Wednesday, New York’s benchmark light sweet crude contract for delivery in April surged 70 cents to $38.18 a barrel, the highest finish since Oct. 16, 1990 in the run-up to the Gulf War. Brent North Sea crude for May delivery surged 85 cents to close at $33.53. “Our view is that these prices could remain at these high (levels) for a while,” Deutsche Bank analyst Adam Sieminski said. “Inventories are very low and demand is very strong in places like China and the United States.”
Prices shot up Wednesday on news of a fall in US gasoline stocks that left the market nervous because American drivers traditionally use high levels of gasoline in the summer.
The US government reported on Wednesday a drop of 800,000 barrels in gasoline stocks last week to a near four-month low of 199.6 million barrels.
Political tensions in major oil producer Venezuela, where the opposition parties are petitioning for a vote to remove President Hugo Chavez, have been adding to market tensions, as well as fears of renewed terrorism in the wake of last week’s Madrid bombings.
Chavez, in an interview published yesterday in The New York Times, said Venezuelan oil would become very expensive for the United States if he were removed by force. “We aren’t going to accept it,” Chavez said, warning, “The price of oil will go up to 50 dollars a barrel.”
Meanwhile, OPEC yesterday cut its forecast for second quarter demand for OPEC crude, underlining the organization’s concern that a large surplus may be looming despite oil’s sustained price surge.
In a monthly report, OPEC’s Vienna-based secretariat also said that its oil output held almost steady in February as red-hot prices gave producers little reason to comply with a mid-month pledge to cut back supply.
The report forecast that demand for OPEC’s crude oil over the second quarter would be 24.76 million bpd, a reduction of 190,000 bpd from the group’s previous projection.
Yesterday’s report showed that it is still concerned about a large surplus of excess oil that OPEC and other market analysts have long been predicting in the second quarter when demand declines after the northern winter.
OPEC ministers use the secretariat’s report as a guide to the state of the oil market. It is the last report before ministers gather on March 31 to review policy.
OPEC’s Feb 10 ministerial meeting pledged to cut back 1.5 million bpd of surplus production over an existing 24.5 million bpd ceiling and to reduce the ceiling by a further one million bpd from April.
OPEC President Purnomo Yusgiantoro said the organization was concerned about high oil prices, but that the group would not back track on its decision to cut production in April.
“That is already policy,” Purnomo said. “We have already cut. Nominations were decided in early March. The April decision is implemented because April nominations were decided at least around March 10.