LONDON, 22 October 2004 — Oil prices struggled to climb yesterday amid profit-taking but remained above $54 on worries of a winter supply crunch after a fifth straight weekly fall in US heating fuel stockpiles.
The price of reference light sweet crude for delivery in December eased one cent to $54.40 a barrel in early deals on the New York Mercantile Exchange. The November contract, which expired at the close of trading on Wednesday, shot to a high of $55.20 a barrel before ending at $54.92, up $1.63 on the day and one cent shy of a record settlement.
In London Brent North Sea crude oil for December delivery rose eight cents to $50.60 in late deals yesterday. “There is some profit-taking and a bit of consolidation,” GNI-Man Financial trader Keith Pascall said.
“Prices will remain buoyant but I don’t think they will go up in a straight line. We will see some correction every now and then. I think prices are going to go higher because of the distillate figures that we saw” Wednesday.
A US Department of Energy weekly snapshot of oil stocks showed stocks of distillates - mostly diesel and heating oil - fell 1.9 million barrels to 119.0 million in the week to Oct. 15. It was the fifth consecutive weekly decline.
A key distillate, heating oil, slipped 500,000 barrels to 49.5 million. “Prices are supported by the strength in middle distillates, in particular gasoil and heating oil,” said Prudential Bache broker Christopher Bellew. “The market is still worried about winter availability.”
Inventories of distillates have dropped heavily following supply problems in the hurricane-battered Gulf of Mexico. “Distillate’s 1.9-million-barrel stockdraw was double market expectations,” Societe Generale (SG) analysts wrote in a note to clients. “Apparently, product pipelines from the Gulf Coast are still a bottleneck, trapping product on the Gulf Coast.”
The US Department of Energy said also that crude oil inventories rose 1.2 million barrels from the previous week to 279.4 million barrels, but this provided little comfort for traders. “Commercial crude stocks will remain a non-issue unless and until the market comes to believe that crude shortages are cutting refinery runs,” SG analysts said.
Market watchers are not ruling out the chances of crude futures prices surging past the $60 level. “We have room to go up to more than $60,” said Tetsu Emori, chief commodities strategist at Mitsui Bussan Futures in Tokyo.
OPEC’s President Purnomo Yusgiantoro urged the organization’s members and other oil-producing nations to raise output to meet the rising demand in an already overburdened market ahead of the northern hemisphere winter. “Oil demand is increasing ahead of the winter. I ask OPEC and non-OPEC producers to increase oil production to ensure there is enough supply in the market,” Yusgiantoro told reporters in Jakarta.
The organization is due to meet next in Cairo on Dec. 10.