Crude Oil Jumps After IEA Says OPEC Output Fell to Two-Year Low
By Robert Tuttle
April 12 (Bloomberg) -- Crude
oil rose 3 percent in New York, the biggest gain in two weeks, after the
International Energy Agency said OPEC reduced supplies to a two-year low to cut
world stockpiles.
March oil output by the Organization of Petroleum Exporting Countries,
source of 41 percent of world supply, fell 165,000 barrels to 30.1 million
barrels a day, the lowest since January 2005, according to the IEA, adviser to
fuel consuming nations. U.S. oil demand my rise after Valero Energy Corp.
returns its McKee, Texas, plant to half capacity this month.
``OPEC is in a very solid position and they know it,'' said Peyton
Feltus, president of Randolph Risk Management in Dallas. As refinery production
rises ``and as OPEC holds their line on cuts, you will see an accelerated
drawdown on crude'' inventories.
Oil for May delivery advanced $1.84, or 3 percent, to $63.85 a barrel
on the New York Mercantile Exchange, the biggest rise since March 29. Futures
have jumped 26 percent since the low closing price for the year on Jan. 18.
Valero spokesman Bill Day today reiterated a March statement that the
McKee plant will return to half capacity this month and full capacity no sooner
than the end of the year. The refinery can processes 170,000 barrels a day and
was shut after a fire in February.
ConocoPhillips Chief Executive Officer Jim Mulva said today that his
company will delay maintenance on its Borger, Texas, plant until McKee returns
to service.
The shutdown of McKee was a ``big deal in that it did depress the
price of'' West Texas Intermediate crude, which is traded on the Nymex, said
Andy Lipow, president of Lipow Oil Associates LLC, a consulting company based
in Houston.
McKee went down when some other U.S. refineries were shutting units
for maintenance, reducing crude processing and contributing to a rise in oil
inventories in four of the past five weekly U.S. Energy Department reports.
Stockpiles gained 0.2 percent to 333.4 million barrels last week.
Refineries operated at 88.4 percent capacity last week, up 1.3
percentage point from the week before, according to the Energy Department.
Gasoline production by U.S. plants fell 2.8 percent to 8.53 million barrels a
day, the second weekly decline.
Gasoline demand, which peaks between the Memorial Day holiday in late
May and Labor Day in early September, averaged about 9.4 million barrels a day
in the four weeks ended April 6, 2.5 percent above the same period last year,
the report showed. Demand typically grows at 1.5 percent to 2 percent a year.
``Since demand was responsible for the product drawdown, it's natural
it's going to put pressure on crude oil inventories,'' Feltus said.
Gasoline futures for May delivery rose 3.31 cents to $2.1918 a gallon
in New York, an eight-month high.
Algeria Bombings
Oil also rose after terrorist bomb attacks yesterday in Algeria, said
Ray Carbone, president of Paramount Options Inc. in New York.
``The region is in turmoil, all around,'' he said. ``Algeria is a big
natural-gas producer and they are a decent sized producer of crude oil.''
The attacks in the capital, Algiers, killed at least 24 people and
came a day after four suspected suicide bombers and a policeman died in Morocco
as security forces raided a suspected terrorist cell in Casablanca. They show
al-Qaeda and its allies pose a ``very real threat'' in North Africa, the U.S.
State Department said yesterday.
Algeria was the world's ninth biggest oil exporter and holder of the
eighth-largest natural gas reserves in 2005, according to the Energy
Department.
Brent crude oil for May settlement rose 88 cents, or 1.3 percent, to
$68.72 a barrel on the ICE Futures exchange in London.
The Paris-based IEA also said today world oil output fell by 265,000
barrels to 85.3 million barrels a day in March from February because of OPEC's
cuts. Shutdowns in some countries, such as Nigeria, affected output as well.
OPEC Production
The 10 OPEC countries with quotas for production said last year they
would cut output to 25.8 million barrels a day from September's 27.5 million
barrels, to keep prices near $60 a barrel.
Excluding Angola and Iraq, which have no quota, output from OPEC fell
to 26.55 million barrels of oil a day, the IEA estimated. That compares with
26.77 million barrels a day in February.
OPEC's basket price, a weighted average of 11 blends produced by OPEC
nations, rose 70 cents to $63.36 a barrel yesterday.
``OPEC output is still trending down,'' analysts at Macquarie Bank
Ltd., including Sydney-based Andrew Blakely and Hong Kong-based David Johnson,
wrote in a report today. ``The threat to output rather than actual cuts has
been the main catalyst behind recent price rises.''
The IEA also trimmed by 250,000 barrels a day its estimate for global
oil demand, partly because of a warm winter in Europe and Asia. Global
consumption is expected to rise 1.8 percent to 85.8 million barrels a day in
2007.
To contact the reporter on this story: Robert Tuttle in New York at
[EMAIL PROTECTED]
Last Updated: April 12, 2007 16:04 EDT
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