Oil Is Little Changed on IEA Forecast, Doubt of OPEC Supply Cut
Dec. 13 (Bloomberg) -- Crude oil was little changed near a two-week low after the International Energy Agency reduced its forecast for Chinese demand and on signs OPEC ministers are divided on the need for a second production cut.
The IEA, an adviser to 26 oil-importing nations, maintained global demand forecasts for 2006 and 2007, and said China's 2006 oil demand growth will be 5.6 percent, down from a previous estimate of 6.2 percent. The Organization of Petroleum Exporting Countries may postpone a decision on further output cuts at its meeting tomorrow, President Edmund Daukoru said today.
"The moves that OPEC have already made have quite significantly begun to tighten the market," said David Fyfe, a supply analyst at the Paris-based IEA. "Further cuts in OPEC supply may not be merited."
Crude oil for January delivery fell 2 cents to $61 a barrel in after-hours electronic trading on the New York Mercantile Exchange at 1:26 p.m. in London.
Industry crude oil inventories fell 40 million barrels in October to 2.7 billion barrels, equal to 54 days of consumption, a day less than in September, the IEA said in a report today. The agency cautioned that high oil prices could trim demand.
Brent crude oil fell in part because Eni SpA said it restored production at the Okono/Okpoho offshore fields in Nigeria over the weekend, bringing back 55,000 barrels a day. Eni had declared force majeure at the fields, meaning the company could not meet contracts, after armed militants attacked last month.
Brent for January settlement declined as much as 40 cents, or 0.7 percent, to $61.12 a barrel and traded at $61.18 on the ICE Futures exchange at 1:27 p.m. in London.
Expressed in U.S. dollars, the price of U.S. benchmark crude, called West Texas Intermediate, is little changed this year. The oil price has fallen 11 percent this year expressed in euros, lost 1 percent in yen and slid 13 percent in British pounds.
OPEC, producer of 40 percent of the world's oil, agreed to trim output by 1.2 million barrels a day last month, citing rising stockpiles. The 11 nations cut production by an average 550,000 barrels in November, according to a Bloomberg News survey of producers, analysts and traders.
"It doesn't have to be a cut," Daukoru said in Abuja, Nigeria, a day before ministers will meet to review production.
"We have probably a little more work to do to make it a better, more stable market," said Saudi Arabian Oil Minister Ali al-Naimi. "The fundamentals of the market are much better today than they were in October," al-Naimi told reporters today in Abuja. He declined to say whether he would support a cut.
OPEC's basket price, a weighted average of 11 blends produced by OPEC nations, fell 33 cents to $57.41 a barrel yesterday.
Crude oil at $60 a barrel is "fair" to both producers and consumers, Kuwaiti Oil Minister Ali Jarrah al-Sabah said in Nigeria today. Iran and Venezuela have called for further cuts.
Libya's top oil official, Shokri Ghanem, told reporters in Abuja that there is "no need" for OPEC to cut output at this meeting and that current oil prices are "OK."
"Energy prices are weak as doubts linger regarding OPEC's ability to forge a hawkish quorum tomorrow," Stephen Schork, president of The Schork Group Inc. of Villanova, Pennsylvania, said in an e-mailed report.
Oil has fallen about 2 percent this week in part because mild weather is reducing U.S. heating demand.
Temperatures in the U.S. northeast, where 80 percent of the nation's heating oil is burned, will probably be above average through Dec. 26, the National Weather Service said yesterday.
Heating demand in the U.S. northeast will be 41 percent below normal through Dec. 19, Belton, Missouri-based forecaster Weather Derivatives said yesterday.
World oil demand peaks in the fourth quarter when refiners make heating fuel for the Northern Hemisphere winter. The U.S. is the world's biggest oil consumer.
An Energy Department report today will probably show U.S. supplies of distillates, including heating oil and diesel, fell 250,000 barrels last week, based on the median estimate from a Bloomberg News survey of 15 analysts. Stockpiles held 132.4 million barrels in the week ended Dec. 1, 0.9 percent more than the five-year average for the period.
U.S. crude oil inventories fell 1.3 million barrels, based on the analyst survey. Stockpiles held 339.7 million barrels on Dec. 1, 14 percent more than the five-year average for the period.
The Energy Department will publish its weekly inventory report at 10:30 a.m. in Washington.
To contact the reporter on this story: Eduard Gismatullin in London at firstname.lastname@example.org.