LONDON, 23 February 2005 — World oil prices surged strongly yesterday, supported by colder temperatures hitting the US northeast and Europe, as traders digested comments from the OPEC president who said there was no need for the oil organization to cut output, dealers said.
New York’s main contract, light sweet crude for delivery in March, surged $1.95 to $50.30 a barrel in early deals - the first time it has breached the $50 mark since November.
Trading in the contract had been closed Monday due to a public holiday in the United States.
In London, the price of Brent North Sea crude oil for delivery in April soared $1.54 to $48.24 a barrel - reaching a three-month high point.
“It’s snowing in New York. The traders are very excited,” said Deutsche Bank analyst Adam Sieminski.
“The weather is not permanent and we are actually through the worst aspect of winter (in the US) already so I suspect that we will see things easing down a little bit.”
European weather was expected to be colder than normal for the coming week, although temperatures in the United States’ northeast — a major consumer of heating oil — were set to recover following a chilly weekend, according to weather forecasters Meteorlogix.
“What we need is to see further build in inventories and maybe (we) will find that out this Thursday” when the Department of Energy publishes its weekly snapshot of US crude inventories, Sieminski added.
The market focus could shift toward heating fuel stocks, analysts noted. “Seeing snowflakes outside has caused a knee-jerk reaction and traders are again buying winter heating fuels,” Williams de Broe analyst Richard Griffin said.
Meanwhile, OPEC President and Kuwait’s Energy Minister Sheikh Ahmad Fahd Al-Sabah said yesterday there was no need for the oil organization to cut output at present, but that the market must be monitored carefully.
“Until now, we don’t have to cut. Until now, the price is very high and we have to respect this price and cooperate with others for the stability of the market,” the minister told reporters in parliament.
Asked if he supported the idea of a production cut at the meeting in Isfahan on March 16, Sheikh Ahmad said that if prices remain at the current level, the same OPEC ceiling will be maintained. “All signals show that there will be a good demand in the second quarter ... With the prices now, I don’t think there is a reason we will cut,” he said.
“If the demand will continue in the second quarter, especially from China and other Asian countries, then we don’t have to cut because the oversupply will go for new demand. It will not go to build the stocks,” which could go above the average, he said.
“With the prices (high), the geopolitical problems and the average stocks until now, I think we are keeping the same ceiling” of 27 million barrels per day (bpd) adopted at an OPEC meeting on Dec. 10, he added.