New York Times: Oil Prices Rise Above $63 a Barrel

December 8, 2006
By THE ASSOCIATED PRESS
Filed at 11:48 a.m. ET

WASHINGTON (AP) — Oil prices rose by more than $1 a barrel Friday, supported by the possibility of a production cut by OPEC next week and amid violence in Nigeria, Africa’s largest oil producer.

Forecasts calling for milder weather had kept downward pressure on the market since the start of the week, but traders often bid up prices ahead of the weekend as a precaution in case of any unexpected supply disruptions.

Light, sweet crude for January delivery gained $1.01 to $63.50 a barrel on the New York Mercantile Exchange.

January Brent crude at London’s ICE Futures exchange rose 93 cents to $63.50 a barrel.

There is considerable uncertainty ahead of a meeting next week of oil ministers from the Organization of Petroleum Exporting Countries.

Some officials have been pressing in recent days for a cut in output on top of a production cut of 1.2 million barrels a day, approved in October.

On Thursday, Saudi Arabia’s ambassador to the U.S., Prince Turki al-Faisal, said current crude oil prices were ”acceptable and imminently fair.” However, Saudi oil minister Ali Naimi suggested earlier in the week that he was concerned about a surplus of global crude-oil inventories.

”They want to keep uncertainty in the market,” said Alaron Trading Corp. broker Phil Flynn.

Recent data from the International Energy Agency showed stocks held among the 30 members of the Organization of Economic Cooperation and Development at the end of September at 2.76 billion barrels, the highest level in almost eight years and 4.5 percent higher than a year ago.

Naimi suggested OPEC needs to take 100 million barrels out of the market to balance it. Kuwait’s Oil Minister Sheik Ali Al Jarrah Al Sabah, who was also at a meeting of Arab oil producers in Cairo, agreed.

”Is Saudi Arabia willing to cut production by a half million barresl? That’s the 64 million dollar question,” said Oppenheimer & Co. energy analyst Fadel Gheit.

Gheit said OPEC ”got spooked when oil crashed from $77 a barrel to $57 a barrel” at the end of summer, which is what prompted the October cut. But he said he has a difficult time believing that the Saudis would willingly give up market share. ”Any cut will be mostly market driven,” meaning it would stem from a dropoff in demand.

In Nigeria, a militant group attacked a southern oil export terminal belonging to a subsidiary of Italy’s Eni SpA early Thursday, taking three Italians and a Lebanese hostage and killing another person, officials said.

Agip officials said oil exports at the 200,000 barrels a day terminal were not affected. The group vowed more attacks will follow if their long-standing demands, which include compensation from Royal Dutch Shell PLC for alleged environmental pollution, are not met.

Since the beginning of 2006, militant groups in Nigeria have attacked pipelines and taken workers hostage in violence that has kept about 500,000 barrels a day of Niger Delta crude off the market, although output has grown offshore Nigeria.

Natural gas futures climbed 5 cents to $7.772 per 1,000 cubic feet on the Nymex, unleaded gasoline rose 1.1 cent to $1.6385 and heating oil prices were up 1.82 cents to $1.7970 a gallon.

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