Sun, Feb 08, 2004 - Page 10 News List

Canceled strike in Venezuela leaves oil traders bereft


World oil prices fell on Friday, tracking a 4 percent slide in US gasoline futures triggered by expectations that recent high prices could prompt an increase in imports, dealers said.

US light crude traded US$0.71 lower at US$32.37 a barrel, extending losses earlier in the week after a government report showed a surge in domestic stockpiles. London crude slipped US$0.51 to US$28.76 a barrel.

Prices had initially started to slip after Venezuelan oil workers union Fedepetrol said it did not plan to call a strike over the recent firing of a group of labor leaders at the state-run oil company.

A former union boss had earlier told a Venezuelan newspaper the sacking of 83 workers could lead to a strike in the world's fifth-largest oil exporter.

Prices extended their decline after sellers began to flood the gasoline market on expectations of a pickup in imports. NYMEX gasoline dropped US$0.0448 to US$0.9610 a gallon.

"The arb for gasoline is wide open and ships are being booked," said Nauman Barakat, senior vice president at Refco.

"Arb" is short for arbitrage, which signifies a difference between prices in different markets.

Gasoline has been riding high in recent weeks due to heavy fund interest and concerns over domestic refinery operations -- giving foreign exporters room to make a profit on US-bound shipments, players said.

Dealers are also closely eyeing signals from producer cartel OPEC, which will meet in Algiers Feb. 10 to discuss its output policy.

OPEC president Purnomo Yusgiantoro said on Friday the cartel was seeking a gradual drop in the oil price and would examine forecasts for the second quarter before making a decision on production next week.

"The important thing is the gradual drop in the price," Purnomo, also Indonesian oil minister, told reporters in Vienna. "What we would really like to see is the prediction of the market situation in the spring."

Oil experts said OPEC is likely to leave its official production limit of 24.5 million barrels a day unchanged since oil prices remain high and US crude stocks are only slightly above 28-year lows.

The cartel, which controls half the world's crude exports, is nonetheless nervous about the expected seasonal ebb in world energy demand this spring, when post-winter energy consumption drops by about 2.6 million bpd.

"If production is maintained at the same level, there has to be a decrease in prices, and nobody knows how far down the price is going to go," Algerian oil minister Chakib Khelil said.

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