Crude oil prices climbed above US$63 a barrel on Friday, capping a week that reignited the market's supply concerns with news of US oil inventories falling and OPEC's decision to cut output in February.
Global crude oil inventories are still abundant, but many energy traders see any potential decline in supplies as a reason to bid up prices -- especially against the backdrop of resilient consumer demand.
Light sweet crude for delivery next month on the New York Mercantile Exchange rose US$0.92 to settle at US$63.43 a barrel on Friday. A day earlier, prices leaped US$1.14 after OPEC's announcement. Over the last three days, the contract has risen nearly 4 percent.
PHOTO: EPA
At London's ICE Futures exchange, Brent crude for February, the new front month, rose US$0.60 to close at US$63.49 a barrel.
The delayed cuts by OPEC, spurred by concerns of bulging worldwide inventories and anticipated non-OPEC supply growth next year, were seen as a warning to the world's major consuming nations.
Saudi Oil Minister Ali Naimi said the price of crude did not figure in the decision.
"What we're working toward is to rebalance the market and this decision does this," he said.
Crude is up about 2 percent on the week. Some analysts say the big post-OPEC announcement surge could be the impetus that brings oil prices back above US$70 a barrel. In mid-July, crude briefly surpassed US$78 a barrel, but dropped sharply. The contract has been trading between US$58 and US$64 a barrel since early October.
Still, there's skepticism about whether oil prices will keep responding to announcements of OPEC cuts -- which some market watchers doubt are being fully implemented, and which many regard as arbitrary decisions made by OPEC members to boost their own revenues.
"We believe that the cartel is drawing a line in the sand at low tide. Although these production cuts will keep prices artificially high, OPEC has learned before, but apparently forgotten, the surging tide of free market forces that we believe will ultimately erase OPEC's drawings on the beach," wrote Peter Beutel of New Cannan, Connecticut-based energy consultancy Cameron Hanover.
The cartel pledged to cut production in February by half a million barrels a day. By delaying action until next year, OPEC left itself a window to decide against a cut, should demand spike higher due to a colder-than-expected winter or stronger-than-expected economy.
"They seem content to let natural winter demand eat away at stocks which, in their view, are out of balance," said John Kilduff, senior vice president for energy risk management at Fimat USA.
"The next tranche of production constraints will begin after the bulk of winter has passed and just before spring replenishment," Kilduff said.
In its official statement, the Organization of Petroleum Exporting Countries said it expects non-OPEC supplies to grow by 1.8 million barrels a day next year, the biggest one-year jump since 1984, and about 500,000 barrels per day more than anticipated global demand growth of 1.3 million barrels.
OPEC's decision followed the US government's weekly report on Wednesday, which showed that inventories of crude oil, heating oil and gasoline fell last week. Crude oil inventories remain well above last year's level, but heating oil and gasoline inventories are now lower than where they were a year ago.
In other Nymex trading, heating oil futures rose US$0.52 to settle at US$1.7817 a gallon, unleaded gasoline rose US$0.213 to settle at US$1.6863 a gallon, and natural gas futures fell US$0.146 to settle at US$7.409 per 1,000 cubic feet.
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