Sun, Dec 21, 2003 - Page 10 News List

Oil prices stay high as US officials warn OPEC


Oil prices held near nine-month highs on Friday, guarding strong gains driven by an early winter slide in US crude and natural gas inventories.

New York crude futures fell US$0.25 to US$33.46 a barrel after hitting US$33.93, the highest front-month level since March 18, two days before the US-led invasion of Iraq. London Brent was US$0.27 lower at US$30.53.

Oil has jumped around US$3 in barely three weeks as colder-than-normal weather in the US. Northeast -- the world's biggest consumer of heating oil -- eats into fuel inventories.

US crude inventories have fallen for the last four weeks to drop 11.6 million below levels a year ago and the lowest December level since the government began tracking the data in 1982.

Distillates stocks, including heating oil, have dropped too, sharpening fears over fuel supplies with more US cold weather forecast for the second half of this month.

US weather forecaster Meteorlogix predicted the week of Dec. 25 to Dec. 31 will show "a pattern featuring more persistent cold weather over the central and eastern United States." Cold weather is also forecast for key Asian consumers Japan and South Korea over the next few days.

Oil prices have risen nearly 25 percent since OPEC's September decision to cut supply by 3.5 percent, buoyed by strong Chinese demand and repeated sabotage at Iraqi oil facilities.

Some OPEC ministers warn the cartel may cut supply again in February on fears of a surplus once demand declines after the northern winter.

OPEC president Abdullah Al-Attiyah said on Thursday the Bush administration raised concerns with him that oil demand will be strong next year and "indirectly" asked the cartel not to cut output.

The Bush administration is concerned that higher prices would "negatively" affect US economic growth, Attiyah said. High oil prices could become an issue in next year's US presidential election campaign.

OPEC's reference crude oil price rose to US$30.73 a barrel on Thursday, well above the cartel's US$22 to US$28 target band. The basket has been above the range for most of the last quarter, last dropping below US$28 for just one day on Dec. 1.

US Energy Secretary Spencer Abraham said crude oil prices were "very high" but stopped short of publicly calling for any action by OPEC to ease them.

"It's very high and, obviously, we have continually stated our belief that the market should be allowed to work," Abraham said.

Meanwhile, EU regulators on Friday approved the US$1.35 billion acquisition by BP PLC and Russia's TNK of a 50 percent stake in Russian oil company Slavneft.

BP-TNK will run Slavneft as a joint venture with another Russian oil company, Sibneft.

"The transaction will only have limited effects in Western Europe in relation to the sale of certain petrochemicals," the European Commission said in a statement.

"On the worldwide market for the exploration for crude oil and gas as well as the development and production of crude oil, the proposed transaction will not result in competition concerns," the commission added.

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