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Oil Prices Drop After OPEC Lowers Demand For Crude
London (AFP) Sep 15, 2005 World oil prices reversed early gains on Thursday after OPEC cut its estimate for global oil demand this year for the fifth time in a row, analysts said. New York's main contract, light sweet crude for delivery in October, fell 39 cents to 64.70 dollars per barrel. In London, the price of Brent North Sea crude for October delivery dropped by 17 cents to 63.20 dollars per barrel. "The view that economic forces are beginning to exert their influence on energy prices took on added weight as OPEC cut its forecast for 2005 world oil," Fimat analyst Mike Fitzpatrick said. The Organisation of Petroleum Exporting Countries said demand for oil was now expected to increase by 1.7 percent from the 2004 figure, to 83.5 million barrels per day (bpd) in 2005, as the effects of Hurricane Katrina combined with those of slower economic growth. In August, OPEC had said global oil consumption would increase by 1.9 percent in 2005, and would average 83.6 million bpd. The downward revision is because of "low growth demand rates for the first half of the year, especially from USA and China", the 11-nation cartel said in a monthly report. OPEC cut also its forecast for 2006, saying it now expected demand to increase by 1.8 percent. The cartel said Hurricane Katrina could also affect demand as its impact "will be felt through the reduction in the economic activity of the United States and the rise in the global price of petroleum products". The market was responding as well to news from the International Energy Agency, which Thursday said it was maintaining its plan to release 60 million barrels of oil from strategic reserves over a 30-day period following the damage caused by Katrina in the United States. After a meeting of the IEA board, executive director Claude Mandil said the energy watchdog would neither extend the release period, nor increase the volume of releases. Oil prices had risen earlier Thursday, extending sharp gains the day before following a report on US petroleum stocks that confirmed severe disruption to energy production and supplies owing to Katrina. "Read this week's US oil statistics as a further indicator of the devastating damage Hurricane Katrina has inflicted on the US economy, where oil demand is nearly synonymous with economic strength," said Deborah White, an analyst for Societe Generale. The US Department of Energy (DoE) said Wednesday that crude stocks had dropped by 6.6 million barrels to 308.4 million in the week ending September 9. Analysts had expected a drop of about 2.0 million barrels. Distillate (heating oil and diesel) stocks fell 1.1 million barrels to 133.3 million barrels, although gasoline (petrol) supplies rose by 1.9 million barrels to 192 million last week. Despite signs that high prices have dampened global demand for crude, the market remains concerned about supply levels, particularly since refineries are struggling to turn crude into heating fuel in time for the northern hemisphere winter. The DoE said US refineries were operating at 87.3 percent of capacity in the week to September 9, up slightly from 86.8 percent in the week just after Hurricane Katrina made landfall on the Gulf Coast on August 29. Expectations of lower demand growth have seen prices fall by as much as 10 percent since striking record high points of 70.85 dollars in New York and 68.89 dollars in London on August 30.
related report The decision came after Saudi Arabia, the world's biggest oil exporter, said it was concerned by spiralling prices and was ready to increase output to compensate for any shortage. The IEA announced on September 2 that its members would release 60 million barrels of oil from strategic reserves over a 30-day period to counter the effects of Hurricane Katrina, which devastated oil-producing capacity on the Gulf coast of the United States. After a meeting of the IEA board, executive director Claude Mandil said the energy watchdog would neither extend the release period, nor increase the volume of releases, which include both crude and refined oil products. "The IEA governing board, after reviewing its initial collective response action ... has decided to maintain its action," he said. Some experts had suggested that the IEA might extend the period of releases because of worries about oil and petrol shortages. Mandil said that the IEA would continue to assess its collective action to the hurricane disaster as additional market information became available, with the next evaluation scheduled for the end of September or in early October. "Many things can happen in between," he said, adding that the review would be influenced by the reconstruction efforts in the US and "market responses to the level of prices". Mandil renewed his call for OPEC oil ministers to agree to increase their production quota at their meeting in Vienna next week. "I think any increase in OPEC production will be a good signal to the market and will be welcomed," he said. Earlier on Thursday, Prince Sultan bin Abdul Aziz of Saudi Arabia, a key OPEC member, had pledged his support for action to counter upward pressures on oil prices. "While expressing our concern about the rise in oil prices, we affirm our readiness to do all that we can to compensate (any) shortage in supplies and meet (any) increase in demand," he said. Oil prices dipped slightly on Thursday to 64.70 dollars per barrel in New York and 63.20 dollars per barrel in London. Seperately on Thursday, OPEC cut its estimate for oil demand in 2005 to 83.5 million barrels per day. The oil cartel said oil demand would grow 1.7 percent this year compared with 2004, not 1.9 percent as previously estimated. Mandil said the IEA board had been briefed by the US and by oil market experts on the pace of recovery in the US and the adequacy of supplies and they had welcomed the IEA's arrangement as timely and appropriate. "Oil and refined product began flowing immediately and will continue into October," the IEA chief said. Commenting on the agreement to release oil onto the market, he added: "The representatives of the 26 member countries reaffirmed their commitment to fully implement the coordinated emergency response decision and confirmed the market-based approach as the most effective mechanism." Earlier in the week, Mandil had commented to energy magazine "Revue le Petrole et le Gaz Arabes" that there was "a possibility" that extra reserves would be put on the market for a longer period than previously agreed. The IEA was founded by the Organisation for Economic Cooperation and Development in 1974 to help industrialised countries plan for, and manage, oil supply problems. Community Email This Article Comment On This Article Related Links SpaceDaily Search SpaceDaily Subscribe To SpaceDaily Express Powering The World in the 21st Century at Energy-Daily.com
Europe Debates Nuclear Energy
Washington (UPI) Jan 11, 2006European Union countries are starting to rethink their opposition to nuclear energy amid a dispute between Russia and Ukraine over natural gas supplies, but energy analysts say a switch still lacks a green light. |
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