NYMEX oil to consolidate, eyeing Venezuela, Iraq

www.forbes.com Reuters, 01.24.03, 9:38 AM ET

NEW YORK, Jan 24 (Reuters) - NYMEX crude futures were expected to open near unchanged on Friday, with the bias toward consolidation as the market assesses a rise in oil production from strike-bound Venezuela.

"We're still in a bit of a corrective mode," a New York broker said. "The Venezuela output seems to be rising steadily and we'll wait to see if that rises any further."

NYMEX March crude was called to open near unchanged after ending overnight trading up 2 cents at $32.27 a barrel, trading from $32.13 to $32.50.

In London, at 9:30 a.m. EST (1430 GMT) Brent March crude was 2 cents lower at $29.70 a barrel.

NYMEX crude prices had been pushed lower by reports of a small rise in Venezuelan oil production, which has been crimped by a seven-week-old strike aimed at forcing President Hugo Chavez from office.

Strikers reported that oil output had risen to 812,000 barrels per day (bpd) -- equivalent to 25 percent of capacity. Earlier in the week, NYMEX crude hit a two-year high of $35.20 a barrel on fears of a U.S.-led war on Iraq.

The United States continued to make its case for war on Friday, saying it had evidence Iraq has maintained its program to produce weapons that have been banned since the 1991 Gulf War.

China and Russia have joined France, Germany and Canada in urging the United States to give U.N. weapons inspectors more time in Iraq.

The U.N. will get its report from weapons inspectors on Monday and U.S. President George W. Bush will address to the nation next week.

U.S. oil inventory data released Thursday showed an unexpected rise in crude oil stocks in the week to last Friday, defying expectations that supplies would fall below 270 million barrels for the first time since 1975.

Technical chart watchers on Friday expected NYMEX crude oil futures to stay consolidative within the month-long $30-$35 range on Friday, with technical indicators neutral and showing little sign of a breakout.

While the predominant threat of war was likely to firm the consolidation support base at $30 formed over the past month, the upside was likely to be capped by speculative selling around resistance in the $34-$35 region.

"The oil market is currently consolidating in a trading range above $30 and the bottom of that range is defended by a widening (U.S.) inventory deficit and the escalation of tension over Iraq," Paul Horsnell at JP Morgan said in his weekly report.

NYMEX February heating oil was called unchanged to 0.10 cent higher after ending ACCESS trade near flat, only 0.04 cent higher at 91.57 cents. Nearby support is expected at 89.50 cents, with resistance due at 93.25 cent.

NYMEX February gasoline also was called unchanged to 0.10 cent lower after it ended overnight trade also near flat, down only 0.06 cent at 89.75 cents a gallon. Support should firm at 88.00 cents, with resistance evident at 92.00 cents.