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Fri, Aug 06, 2004 - Page 12 News List

Oil futures rebound on OPEC chief's assurances


Crude oil futures rebounded yesterday from an overnight tumble on doubts about whether the OPEC could supply enough oil to meet demand.

The September light sweet crude contract on the New York Mercantile Exchange traded at US$42.98 a barrel, up US$0.15 in an active electronic trading session, with 3,794 contracts changing hands.

Prices reached a record high of US$44.34 per barrel on Wednesday -- up US$12.50 from last year -- even though OPEC had said it was prepared to boost production by up to 1.5 million barrels a day to plug the supply gap.

Traders said they had misgivings about the announcement, which contradicted a statement on Tuesday by OPEC President Purnomo Yusgiantoro saying the group couldn't pump any more oil in the immediate future.

"Everyone is relying on OPEC for oil, but there is doubt," said Energyasia.com analyst Ng Weng Hoong, adding that there is uncertainty over the amount of reserves held by oil companies and Middle Eastern countries.

He cited Royal Dutch Shell's acknowledgment in January that it had less reserves than it initially reported.

On London's International Petroleum Exchange, September Brent crude futures were expected to open higher yesterday.

Oil prices have been steadily rising since July 28, mainly on worries about production capacity constraints due to uncertainty over Yukos and concerns about the reliability of supplies from Iraq, where saboteurs have attacked pipelines and disrupted exports.

Terror fears in the US have also played a role in the price spike following Washington's warning on Sunday that al-Qaeda was planning attacks on key financial institutions in New York, New Jersey and Washington.

There is also concern about oil production in Nigeria, where labor unrest is common, and in Venez-uela, which faces a presidential recall ballot in less than two weeks.

``Nigeria, Venezuela, Russia, these are jokers in the pack,'' Ng said. ``They come out from time to time and cause additional headaches. In the past, we tended to ignore that but not anymore.''

Oil markets are fretting that Yukos' 1.7 million barrels per day of crude output may dry up if it goes bankrupt.

Meanwhile, Ng warned of further price increases in northern countries as winter approaches.

``We're going to move into the winter season and there will definitely be stock building in the northern hemisphere. In Asia, China, Japan and [South] Korea are likely to drive kerosene prices up,'' he said.

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