LONDON, 22 January 2005 — World oil prices soared yesterday, supported by cold temperatures in the United States and as traders began positioning themselves ahead of a looming OPEC meeting and landmark Iraqi elections.
New York’s main contract, light sweet crude for delivery in March jumped $1.39 to $48.70 a barrel in early deals. In London, the price of Brent North Sea crude oil for delivery in March gained $1.38 to $45.70 a barrel in late trading. “People are still very nervous ahead of the Iraqi elections and the OPEC meeting,” Investec analyst Bruce Evers said.
There are fears that violence could spoil polling day on Jan. 30, risking disruption to oil supplies out of Iraq. Yesterday, insurgents sabotaged an oil pipeline in northern Iraq, interrupting the flow of crude to a major refinery, Iraqi police said.
The Organization of Petroleum Exporting Countries was meanwhile set to meet on the same day as the Iraqi elections — and the likelihood of a production cut has caused mounting market tension.
OPEC yesterday said that global oil demand growth would be stronger than expected in 2005 and said its output would be “more than sufficient” to meet consumer needs.
OPEC said it was raising its forecast for global oil demand growth this year to 83.64 million barrels per day, marking an increase of two percent on 2004.
The 11-member cartel agreed in Cairo last month to reduce production by one million barrels a day from the start of 2005 to bring the group closer to its official output ceiling of 27 million barrels.
Expectations of an output cut have increased in recent days after the United States announced further builds in its crude stockpiles. “As US stocks build there are concerns that OPEC may seek to make an additional cut in crude supply, after agreeing to trim over-quota leakage by a million barrels per day from Jan. 1,” analysts at the Sucden brokerage firm said.
US crude oil reserves rose by 3.4 million barrels to 292.2 million in the week that ended January 14, a Department of Energy (DoE) report said and are now 8.0 percent above the level during the same period a year ago.
The report showed however a dip of heating oil reserves of 500,000 barrels to 49.1 million — a worry due to a coldsnap in the United States’ northeast region, which consumes 80 percent of the country’s heating fuel.
Temperatures hit a low of minus 11 degrees Celsius in New York on Thursday. “We’re really seeing some strong support at current levels (due to) continued fears of a cold winter in the US,” said Daniel Hynes, an energy analyst at ANZ Bank.
Elsewhere, oil consumption in China was set to rise in 2005 as the energy-hungry giant seeks to power its fast-paced economy, albeit at a slower pace than previous years, industry executives said.
