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The Wall Street Journal: Crude Climbs On Norway Outage, OPEC Plans

EXTRACTS: In Norway, authorities shut down three offshore oil fields that together produce 280,000 barrels a day, as a result of a lack of approved lifeboats.

Norwegian state-controlled Statoil ASA shut down the 115,000-barrel-a-day Snorre A and the 85,000-barrel-a-day Vigdis fields, while Royal Dutch Shell PLC halted production at the 80,000-barrel-a-day Draugen field. Statoil said work to repair the lifeboats will start as soon as possible.

THE ARTICLE

By MASOOD FARIVAR
October 14, 2006; Page B5

Crude-oil futures were lifted higher for a second straight session Friday by news of a production shutdown in Norway and plans by OPEC to cut output.

Forecasts of unseasonably cold weather in the Northeast and a rare, early October snowstorm in parts of the Great Lakes added to the momentum, but analysts said prices remain vulnerable to further declines.
 
“It wasn’t a bad recovery for the week, but the market feels vulnerable,” said Tom Bentz, an analyst at brokerage BNP Paribas Futures in New York. “Once again, the rally failed to hold, and you failed to convince that we’re going to move higher.”

At the New York Mercantile Exchange, nearby November crude futures rose 71 cents to settle at $58.57 a barrel. The contract had gained 27 cents Thursday after dropping to a 10-month low of $57.22 a barrel.

In Norway, authorities shut down three offshore oil fields that together produce 280,000 barrels a day, as a result of a lack of approved lifeboats.

Norwegian state-controlled Statoil ASA shut down the 115,000-barrel-a-day Snorre A and the 85,000-barrel-a-day Vigdis fields, while Royal Dutch Shell PLC halted production at the 80,000-barrel-a-day Draugen field. Statoil said work to repair the lifeboats will start as soon as possible.

The Norwegian production outage is likely “to prove transitory,” said Jason Schenker, an oil economist at Wachovia Corp. in Charlotte, N.C.

Of greater concern to traders is whether and how much the Organization of Petroleum Exporting Countries will cut production. As prices have tumbled in recent weeks from their August highs of more than $77 a barrel, OPEC officials have vowed to cut output to stem a further slide. But pulling off an output-cut agreement by all 11 OPEC members has proved easier said than done.

Mr. Bentz said the market has factored in the likelihood of a one million-barrel-a-day cut in OPEC’s current production quota of 28 million barrels a day. A cut from quota would remove less than one million barrels a day from the market, because the group is already producing under its ceiling.

In other commodity markets:

CORN: Prices at the Chicago Board of Trade rose to life-of-contract highs for the second day in a row as the market continued to digest Thursday’s lower-than-expected crop estimates from the Agriculture Department. Weekly export sales data were also supportive. December corn rose 16.25 cents to $3.145 a bushel.

GOLD: Futures on the Comex division of Nymex rose to 1½-week highs supported by a firmer tone in oil. October gold rose $12.50 an ounce to $588.80.

Write to Masood Farivar at [email protected]

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