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AFX Asia (Focus): Oil edges up as market expects falls in US gasoline and distillate stocks UPDATE

EXTRACT: Elsewhere, prices were lent support by Royal Dutch Shell’s announcement that it reduced production from Nigerian operations by 187,000 bpd following a major spill from a pipeline in the Niger Delta. Shell added it would take days to repair the leak.

Published: Mar 07, 2007

LONDON (AFX) – Oil rose as market participants expect today’s weekly US inventory data to show falls in gasoline and distillate stocks.

Recovering global stock markets also underpinned oil prices as fears that recent equity weakness could soften oil demand faded.

At 10.31 am, front-month Brent North Sea crude contracts for April delivery were up 40 cents to 61.79 usd per barrel. Brent rose 85 cents to close at 61.39 usd yesterday.

Meanwhile, front-month New York light sweet crude contracts for April delivery were up 24 cents to 60.93 usd a barrel, after gaining 62 cents to settle at 60.69 usd yesterday.

“Crude prices were helped higher on expectations that the Energy Information Administration (EIA) data released this afternoon will show a significant draw in gasoline stocks,” said Bank of Ireland analyst, Paul Harris.

The EIA, the US Department of Energy’s statistical arm, will release the closely monitored figures at 3.30 pm.

According to an AFX News poll of analysts, the EIA data is expected to show distillate stocks, which include heating oil, fell by 2.3 mln barrels in the week to March 2 as cold weather continued in the US.

It is also expected to show gasoline stocks to have dropped by 1.04 mln barrels, as a result of recent troubles in the oil refining sector in the US. Crude stocks are predicted to have risen by 1.8 mln barrels.

The worldwide stock markets’ recovery after sharp falls last week also boosted sentiment.

Europe’s bourses have opened modestly higher this morning, with the recovery underpinned by yesterday’s sharp recovery on Wall Street and after US Treasury Secretary Henry Paulson said Asia’s two biggest economies remain sound, dealers said.

“There is an expectation that when the equity markets complete the current correction, oil will resume its upward trajectory to test the 65 usd level,” noted Harris.

Last Tuesday, the benchmark Shanghai Composite Index plunged 9 pct, triggering huge losses on Wall Street and other markets.

Oil players initially showed a strong resilience to the weakness but eventually succumbed to the notion that the weakness could mean slower economic growth and consequently softer oil demand.

Elsewhere, prices were lent support by Royal Dutch Shell’s announcement that it reduced production from Nigerian operations by 187,000 bpd following a major spill from a pipeline in the Niger Delta. Shell added it would take days to repair the leak.

Also in the background, traders are reluctant to take on new positions ahead of OPEC’s summit next week in Vienna on March 15. It is widely expected the cartel will leave production quotas unchanged having cut output by 1.7 mln barrels previously, with some success.

However, Citigroup analyst, Tim Evans warned: “There remains some risk of either a shift of the consensus or a statement that sparks a reaction in the market.

“Unless the (stocks) data truly shocks, we think the market may remain relatively subdued and range-bound, with traders reluctant to pile up new positions ahead of next week’s OPEC summit.” [email protected] ma/jag/as/pp/as/slm

 Copyright AFX News Limited 2007. All rights reserved.

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