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New York Times: Oil Below $59; Focus on OPEC Debate, US Stockbuild

Published: October 11, 2006
Filed at 2:20 a.m. ET

SINGAPORE ( Reuters) – Oil held below $59 a barrel on Wednesday, hovering near its lowest level in eight months as traders anticipated a build in U.S. crude stocks and grew impatient with OPEC’s haggling on the details of an output cut.

U.S. crude (CLc1) rose 2 cents to $58.54 a barrel by 0617 GMT, after slumping $1.44 on Tuesday, less than a dollar off last week’s $57.75 low, the weakest since February. London Brent crude (LCOc1) gained 5 cents to $59.39.

Despite OPEC’s apparent agreement on the principle of a 1 million barrels per day (bpd) output cut, a debate over the details of how and when to cut have held up a formal deal, keeping crude bouncing between $58 and $63 a barrel.

“Oil is still in range-bound trading,” said Keiichi Sano, manager with the commodities business unit at Sumitomo Corp.

“Basically fundamentals are weak with accumulated stocks of crude oil and products, and maybe decreasing demand from Asian markets, other than China, and the U.S.”

U.S. data due on Thursday — a day later than usual — is expected to show an 800,000-barrel increase in crude stocks and a 100,000-barrel rise in distillate inventories, but a 500,000-barrel draw on ample gasoline stocks, a Reuters survey found.

The Organization of the Petroleum Exporting Countries (OPEC), which pumps more than a third of the world’s oil, is working out details of its first output cut in two years after oil fell from a July peak of $78.40, undermined by heavy U.S. inventories and easing anxieties over the Middle East.

The main stumbling block appears to be whether to make a reduction from OPEC’s notional 28 million-bpd production ceiling or from actual supply of near 27.5 million bpd in September.

Iran’s OPEC governor said in the oil ministry’s Web site on Tuesday talks continued on the plan over the first supply cut since April 2004. Ministers remain undecided over whether to meet in person to formalize the cut before the next scheduled gathering on December 14, an official at OPEC’s Vienna headquarters said.

The U.S. Energy Information Administration said on Tuesday in its monthly oil market report that actual supply cuts by OPEC as a group would be less than stated because cuts were prorated among its members based on previous quota levels, and several members were already producing below their quotas.


Adding to the bearish picture, U.S. government weather forecasters said on Tuesday they expected El Nino to bring warmer-than-average temperatures across much of the country for the winter season, December through February.

Supply concerns also eased after the Trans-Alaska Pipeline resumed service after an almost 10-hour shutdown due to flooding that caused communication problems on Tuesday.

The line carries about 750,000 bpd of crude oil to a terminal in Valdez in southern Alaska where tankers are loaded. BP’s (BP.L) 400,000-bpd Prudhoe Bay — the biggest oilfield in the United States — was also forced to shut down due to a power outage, but output was due to be restored late in the day.

Investors are wary how world powers will deal with North Korea, which claimed its first nuclear test on Monday, and Iran, of which a top authority said on Tuesday Tehran would pursue its right to develop nuclear technology, hinting not to stop uranium enrichment as the West demands.

Political directors from the six powers are due to discuss a menu of sanctions on Wednesday via video conference, said State Department spokesman Sean McCormack. U.N. ambassadors are expected to take up the issue after Wednesday’s meeting.

In Nigeria, armed villagers invaded an oil platform operated by Royal Dutch Shell (RDSa.L) on Tuesday, holding up to 60 workers hostage in a dispute over community benefits and shutting in 12,000 bpd of crude from the world’s eighth-largest exporter. and its sister non-profit websites,,,,,, and are owned by John Donovan. There is also a Wikipedia feature.

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