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The New York Times: Oil Holds Above $68 as Iran Clouds High OPEC Output

By REUTERS
Published: January 31, 2006
Filed at 2:18 a.m. ET
SINGAPORE (Reuters) – Oil prices held steady above $68 on Tuesday as international pressure grew on fourth-largest exporter Iran over its nuclear program, overshadowing an expected OPEC decision to maintain output near a 25-year high.
U.S. light crude (CLc1) edged 3 cents up at $68.38 a barrel by 0653 GMT, after climbing 59 cents on Monday. London Brent crude (LCOc1) gained eight cents to $66.67.
OPEC ministers meeting in Vienna have given strong support to keeping oil output steady as worries over supplies from major producers have helped U.S. prices gain 12 percent since the start of the year.
“Geopolitically there are lots of hot spots, like Iran and Nigeria. Supply disruptions are bigger concerns than high oil inventory levels in the United States,'' said broker John Brady at ABN AMRO in New York.
The five permanent members of the U.N. Security Council agreed on Tuesday that the U.N.'s nuclear watchdog, the International Atomic Energy Agency, should report Iran to the Council over its nuclear program when it meets in an emergency session on Thursday.
Traders fear this would be a move that could prompt Tehran to consider using its oil as a political weapon. Analysts say any disruption from Iran, OPEC's second-biggest producer, would send prices soaring.
Major U.S. supplier Venezuela has also promised to back Iran in its argument with the West. Concerns over lost output from Nigeria and a fall in Russian energy exports have also added to a market boosted by strong fund investor buying.
Prices were given a further boost on Monday as refiners in the United States, the world's top oil consumer, slowed fuel production due to slumping profit margins and units being shut for maintenance.
The market has rallied despite healthier U.S. inventory levels, a pledge from Saudi Arabia to fill supply gaps and the promise of an emergency release from Western government stockpiles if Iran or Nigeria halted exports.
Although OPEC remains concerned over a seasonal dip in second quarter demand, Saudi Arabian Oil Minister Ali al-Naimi told reporters in Vienna that all OPEC ministers were in agreement to leave output unchanged at their Tuesday meeting.
“It makes no sense to cut,'' said Libyan Energy Minister Fathi Omar Bin Shatwan. “The price is quite high. Maybe we will monitor the situation because usually in Q2 the situation can change,'' he told reporters in Vienna on Monday.
Al-Naimi said on Sunday he saw absolutely no reason for OPEC to cut output this year, pointing to economic growth in Asia as driving oil prices.
Japan, the world's third-largest oil consumer, imported nearly eight percent more crude in December than a year earlier, leaving crude imports over 2005 up 0.7 percent on the year, government data showed on Tuesday.
In Nigeria, major producer Royal Dutch Shell (RDSa.L) has partially restarted output at its 115,000 barrel per dayEA field, but industry sources said it has no immediate plans to resume repairs on the damaged onshore pipeline that has cut the other 106,000 bpd of its production.
Nigerian militants have said they will continue with their attacks with an aim of reducing exports by 30 percent next month.

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