Oil steady, watching US fuel stocks and UN on Iraq

stuff.co.nz 07 May 2003

SINGAPORE: Oil prices held steady last night awaiting US fuel data for signs of stocking in key gasoline supplies ahead of the peak-demand summer-holiday period, which kicks off at the end of the month.

US light crude traded down three cents to $26.46 a barrel, little changed after Monday's (yesterday, NZT) 82-cent rise in New York.

London's benchmark Brent crude jumped 77 cents to $24.29 a barrel in catch up with the US market. The International Petroleum Exchange was closed on Monday for a public holiday.

US oil prices pushed higher on Monday partly on concerns of a possible gasoline supply crunch in coming months when consumption traditionally peaks.

Gasoline demand in the United States burns up about 12 per cent of global oil supply and is used by traders as a barometer of overall oil demand between the end-May Memorial Day holiday weekend and September's Labor Day.

Data for the week ended May 2 from the government's Energy Information Administration are expected to show a three-million-barrel rise in crude inventories, with gasoline increasing by 1.75 million barrels, said six analysts, polled by Reuters.

US oil stocks have been running at sharp deficits to levels of a year ago. The EIA's report last Wednesday showed US gasoline stocks up by 4.4 million barrels but still 10.5 million barrels below levels at the same point last year.

Crude stocks rose in the week to April 25 by 1.8 million barrels to 288 million, but remained a little over 38 million barrels below a year ago, the EIA said.

"Last year we saw how susceptible the market was to a major supply disruption with the strike in Venezuela. In previous years we have seen the market rise due to stress on the refinery network in the United States," said Sydney-based oil analyst Simon Games-Thomas.

"These factors will support the oil price at, or above, current levels," he said in a daily note.

IRAQI OIL IN UN TANGLE

Oil prices have also found support from a lack of progress in restoring crude supplies from Iraq, where production ground to a halt shortly before the US-led invasion that toppled Saddam Hussein.

Before the war, Iraq was pumping up to 2.5 million barrels per day (bpd) and exporting 1.7-2.0 million bpd, or roughly four per cent of internationally traded oil.

Diplomats at the United Nations said on Monday that Iraq's exports remained stalled despite the weekend appointment of Thamir Abbad Ghadhban to run the country's oil ministry.

The UN Security Council, which oversaw the sale of Iraqi crude under the seven-year-old oil-for-food programme permitted under UN sanctions, is deadlocked over setting up a legal framework to resume sales.

Iraq has crude in storage that could be exported now, but without a competent authority to sign and certify sales oil firms are reluctant to trade the oil for fear of breaking the law.

The United States is expected to produce this week a draft resolution to lift UN sanctions on Iraq, in place since Baghdad invaded neighbouring Kuwait in 1990.

Diplomats said the US proposal would transfer Iraq's oil wealth to a new Iraqi administration with World Bank oversight.

Russia and other Security Council members want the oil sales to remain under UN control.

A UN diplomat representing one of the five permanent UN Security Council members – Britain, China, France, Russia and the United States – said it was "still too early" to say whether Washington's proposal would face resistance similar to earlier this year when it sought authorisation to invade Iraq.