Crude oil prices fell after Kuwait said its exports won't be reduced by an explosion last week that forced OPEC's sixth-largest producer to shut its northern fields, or as much as a quarter of the country's output.
Kuwait, which pumps about 2.5 percent of world supply, yesterday said it will export oil from storage, and try to restore in two weeks flows from the fields that recently produced 450,000 barrels to 500,000 barrels a day. Prices rose almost 5 percent Friday partly on concern that shipments would be reduced.
"Crude oil is drifting lower because the Kuwait situation turned out not to have to affected exports," said Michael Fitzpatrick, a broker at Fimat USA Inc in New York.
Crude oil for March delivery fell as much as US$0.22, or 1.1 percent, to US$19.85 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It recently traded at US$19.88.
The contract fell US$0.31 to US$20.07 in floor trade.
The explosion on Thursday destroyed Gathering Center 15, where crude oil arrives from the fields to be processed before being sent to export terminals. The blast killed four people and injured 17. It was the third fatal explosion at a Kuwait oil installation in as many years.
Fields with capacity of as much as 600,000 barrels a day will be lost for at least two weeks, said Nora al-Soula, a spokeswoman for state-owned Kuwait Oil Company.
Still, "exports will remain unaffected as we have 14 million barrels stored in tank farms," said Fadl Ali Jerman, a spokesman for Kuwait's oil ministry. ``That will give us about 25 days cover, but we should make up the lost production from other fields'' by the end of the week, he said.
Before the blast, Kuwait had total capacity of 2.65 million barrels a day, according to Bloomberg estimates. The OPEC member produced 1.84 million barrels of crude oil a day in January, down 100,000 barrels from December, according to a Bloomberg survey of oil companies, producers and analysts.
Prices may fall further if a US stockpile report confirms analysts' expectation that crude oil inventories rose last week as refiners kept processing rates close to a two-year low to retool for the summer gasoline season.
Supplies of crude oil probably rose between 1.8 million and 2.3 million barrels from 315 million the previous week, according to a Bloomberg survey of seven analysts before a report on Monday from the American Petroleum Institute.
The institute last week said that US refineries were operating at 85.8 percent of their capacity, the lowest level since February 2000. Analysts expect another 0.6 percentage-point drop in Tuesday's report, as profit margins that are down by about a quarter from a year ago discourage production.
"Crude oil stocks are going to go higher whenever you have refineries operating at these depressed rates," said Bill O'Grady, director of fundamental futures research at AG Edwards & Sons Inc in St. Louis. "They aren't processing the crude, so stockpiles are rising."
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