Oil Prices Edge Higher After 2-Day Slide
— LONDON (Reuters) - Oil prices posted slight gains on Friday after two days of sharp declines following evidence that strike-bound Venezuelan production is beginning to recover.
U.S. light crude added seven cents to $32.32 a barrel and London Brent gained four cents to $29.76. U.S. crude hit a two-year high of $35.20 earlier this week.
President Hugo Chavez raised the stakes in Venezuela's bitter oil industry conflict on Thursday by announcing 3,000 oil company executives were sacked and saying oil output was rising faster than expected.
Chavez is using troops and replacement crews to break a seven-week-old strike aimed at driving him from office. He still faces huge problems restarting refineries and persuading foreign shippers to resume exports.
Anti-government oil workers concede crude output has risen to 812,000 barrels per day (bpd), 25 percent of pre-strike capacity, but say 85 percent of its workforce remain out.
Opposition data lags government estimates, which peg production above one million bpd, but both figures show a steady recovery over the past fortnight.
Oil markets are not betting on any swift increase in Venezuelan output.
"For the oil markets, a definitive end of the strike does not translate into an immediate return to pre-strike output levels," said Michael Rothman of Merrill Lynch.
"Reliable indications suggest it may take 30-45 days to get production back to the 1.5 million barrel a day mark with 45-60 days to necessary to elevate production by an additional million." Pre-strike output was 3.2 million bpd.
OPEC Secretary-General Alvaro Silva said OPEC is already doing all it can to bring world oil prices down and sees no lack of crude on world markets.
"What can we do more? I do not agree there is a lack of oil," Silva told reporters in Davos on the sidelines of the annual World Economic Forum. "The problem of the price is the threat of war (on Iraq)."
He said OPEC producers were "doing our best" to bring crude below $28 a barrel, the top end of the group's targeted price range.
Supply concerns in the United States eased when government figures released on Thursday showed crude oil inventories up 1.5 million barrels to 273.8 million during the week to Friday.
The increase defied predictions that inventories would fall below 270 million barrels for the first time since 1975. Higher shipments from Saudi Arabia have flowed in to blunt the impact of the Venezuelan disruption.
Fresh signs that the United States is willing to face down international opposition to an attack on Iraq made little impact on the oil market.
On Thursday, Washington shrugged off vocal opposition to what some allies see as a rush to war as China and Russia joined France, Germany and Canada in urging the United States to give U.N. weapons inspectors more time in Iraq.
Secretary of State Colin Powell said Washington would find other supporters if it decided to launch military action.
"I don't think we'll have to worry about going it alone," Powell said in Washington after talks with Britain's supportive Foreign Secretary Jack Straw. He said Washington had made no decision on whether to seek an additional U.N. resolution to authorize use of force to disarm Baghdad.
Dealers said a war on Iraq was now priced into the oil market and cited predictions that any stoppage in Iraqi production could prove short-lived.
The Pentagon said it would make no sense for U.S. forces to hit oil facilities and oil companies said they were expecting only a brief stoppage in Iraq's two million barrels daily of exports.
"We are banking on a two- to four-week loss of Iraqi oil and we've covered ourselves," said a senior executive at a major oil company in comments typical of the industry viewamong companies contacted by Reuters.