Oil softens, market still nervous

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21/11/2000 12:02 - (SA) Oil softens, market still nervous

Singapore - Oil prices drifted lower on Tuesday, succumbing to light profit-taking after a day-earlier run-up as parts of the United States hunkered down for the first big cold blast this winter.

US benchmark crude futures had slipped 26 cents to $34.96 a barrel at 0602 GMT after surging more than 80 cents in New York dealings to an intraday peak at $35.84.

Late profit-taking shaved those gains to just 19 cents to close at $35.22. In London January Brent crude traded 19 cents lower at $32.88 in pre-open activity.

Panic buying struck in the New York heating oil pit on Monday amid forecasts that temperatures in the US northeast, the nation's biggest consuming area for winter heating fuel, would slide as much as 14 degrees below normal.

Predictions of a chilly spike sent US heating oil at one point to within a whisker of a 19-year peak at $1.11 a gallon set in October.

Fuel stockpiles in the United States have been running up to 30 percent below year-ago levels and a prolonged cold snap could put additional strain on already depleted inventories.

But traders are likely to be wary of taking any big new positions ahead of Thursday's Thanksgiving public holiday in the United States. The New York Mercantile Exchange will close early on Wednesday and remain shut until November 27.

The market also is awaiting fresh weekly statistics for US fuel stockpiles due to be released by the American Petroleum Institute after the close of business on Tuesday.

The API last week posted hefty builds in crude oil and gasoline stocks, but these were offset by a draw in heating oil.

Supply concerns remain the focus of attention following OPEC's decision last week to hold production at the current level of 26.7 million bpd, excluding Iraq, at least for the time being.

The Organisation of Petroleum Exporting Countries (Opec), which controls two-thirds of world crude exports, wants to wait and see how its last output hike on October 31 - the fourth this year - will impact supplies once it feeds through to the market.

Opec has jacked up production by 3.7 million bpd since March and reckons that world supply now exceeds demand by about 1.4 million bpd.

The 11-member cartel is worried that prices might come crashing down early next year once the peak-demand northern hemisphere winter ends and stocks return to more normal levels.

Intermittent worries over possible disruptions to Iraqi crude flows also have underpinned prices in the last few weeks, but analysts now say that after several false alarms, the market will wait for concrete signs of halts to exports before pushing oil much higher.

Baghdad, whose oil exports are monitored under United Nations' sanctions following its 1990 invasion of Kuwait, has made a host of demands in recent weeks including shifting oil payments into euros and a 50-cent surcharge to its customers.

"The market has already priced in a chance that Iraq will suspend oil exports. In order to drive the prices noticeably higher, we now need to see some specific actions," said Timothy Evans, analyst with IFR-Pegasus in New York.

A renewed flare-up of violence in the Middle East will also keep oil traders on their toes.

Fighting between Israeli troops and Palestinians raged early on Tuesday, hours after Israel launched missile strikes on Palestinian security targets in retaliation for the bombing of a Jewish settlers' school bus.

http://news.24.com/News24/Finance/Markets/0,1466,2-8-21_943373,00.html

-- Martin Thompson (mthom1927@aol.com), November 22, 2000


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