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Oil Is Steady Amid Concerns of U.S. Refinery Strikes, OPEC Cuts




By Christian Schmollinger

Feb. 2 (Bloomberg) — Crude oil was little changed in New York amid concern that workers may strike at U.S. refineries, limiting fuel supplies, and OPEC may enact deeper output cuts.

The United Steelworkers union and U.S. oil processors agreed to extend negotiations on contract proposals for 30,000 of its members. A strike may affect 8.7 percent of U.S. refinery capacity. Venezuela, the sixth-largest producer inOPEC, would support further output cuts to prevent a glut in an over-supplied market, Energy Minister Rafael Ramirez said yesterday.

“If the refineries come to a halt then everyone is afraid about the supply of products,” said Ken Hasegawa, a commodity derivatives sales manager at Newedge Group in Tokyo. “OPEC is working very hard to keep their production cuts in place and it is starting to work down the inventories.”

Crude oil for March delivery was at $41.52 a barrel, down 16 cents, in after-hours electronic trading on the New York Mercantile Exchange at 2:07 p.m. Singapore time. Prices earlier rose as much as 1.5 percent to $42.31 a barrel

The contract gained 0.6 percent to $41.68 a barrel on Jan. 30 as the threat of strikes in the U.S. helped push gasoline futures to an 11-week high and the Commerce Department reported a smaller-than-expected contraction in the U.S. economy in the fourth quarter.

Brent crude oil for March settlement rose as much as 68 cents, or 1.5 percent, to $46.56 a barrel on London’s ICE Futures Europe exchange. It gained 1.1 percent to $45.88 a barrel on Jan. 30.

Labor Contract

New York futures fell 10 percent last week and are down 71 percent from the record $147.27 a barrel on July 11. Prices reached $32.40 on Dec. 19, a four-year low for the front-month contract.

The labor group didn’t receive any new proposals from Royal Dutch Shell Plc yesterday, Lynne Baker, a spokeswoman for the United Steelworkers union, said in an e-mail. “Both parties continue to discuss bargaining issues,” she said, without giving details.

“We are still working under a rolling 24-hour contract extension and will continue to bargain till we reach an agreement or either party terminates the contract,” Baker said.

The negotiations cover workers at 86 plants including operations owned by Exxon Mobil Corp., Valero Energy Corp., BP Plc and Chevron Corp. as well as Shell. The contract extension was agreed on late yesterday in Austin, Texas, where the talks started Jan. 20.

Shell ‘Optimistic’

“We’re pleased progress is being made and we’re optimistic that a mutually satisfactory agreement can be reached with the USW,” said Stan Mays, a spokesman for Shell. He declined to discuss the negotiations.

Last week the union rejected Shell’s third offer, a three- year contract with a $500 signing bonus and 2.5 percent wage increases in the second and third years, according to a Jan. 28 memo distributed by the union. Employees would have received a 75 cent-an-hour increase in the first year.

The Organization of Petroleum Exporting Countries accounts for about 40 percent of global oil supplies and last month agreed to reduce output by 2.46 million barrels a day, or 9 percent, starting Jan. 1 to stem the slide in prices.

Members are complying “100 percent” with the new quota which is starting to bring stability to the market, Ramirez told reporters in Caracas. Still, demand has continued to contract since the new ceiling was set and Venezuela would support any additional output cuts sought, he said.

OPEC will reduce daily shipments of crude oil by 0.7 percent to 23.55 million barrels a day in the four weeks to Feb. 14, industry consultant Oil Movements said in a Jan. 29 report.

Oil Movements

OPEC has fulfilled pledges made in September and October to remove 2 million barrels a day of output from the market, according to Oil Movements. It has yet to begin a new 2.2 million barrel-a-day cut that was due to take effect from Jan. 1, according to the tanker tracker.

Gasoline for March delivery was barely changed at $1.2690 a gallon on Nymex after earlier falling as much as 0.12 cent. It gained 2 percent to $1.2687 on Jan. 30.

Heating oil for March delivery fell 1 percent to $1.44 a gallon. The contract rose 1.8 percent on Jan. 30.

Cold temperatures mid-week will push New York heating demand 8 percent above average this week, Meteorlogix LLC said in a forecast yesterday.

Hedge-fund managers and other large speculators increased their net-long position in New York crude-oil futures in the week ended Jan. 27, according to U.S. Commodity Futures Trading Commission data.

Speculative long positions, or bets prices will rise, outnumbered short positions by 51,652 contracts on the New York Mercantile Exchange, the Washington-based commission said in its Commitments of Traders report. Net-long positions rose by 5,518 contracts, or 12 percent, from a week earlier.

To contact the reporter on this story: Christian Schmollinger in Singapore at[email protected]

Last Updated: February 2, 2009 01:42 EST

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