Oil: Prices fall as US build eases supply fears

<a href=www.nzherald.co.nz>New Zeland Herald05.06.2003 8.30 am

NEW YORK - World oil prices dipped on Wednesday (New York time) as an increase in petroleum inventories in the United States, the world's largest energy consumer, eased fears of a summer supply crunch.

Prices were also pressured by comments from Opec member Indonesia that the producer cartel would not need to further curtail supplies at a meeting next week to counter an expected resumption in exports from Iraq.

US light crude oil futures dropped 62 cents to US$30.05 a barrel, while internationally traded London Brent crude dipped 47 cents to US$26.80 a barrel.

US crude oil supplies jumped 2.8 million barrels in the week ended May 30, with petrol supplies up 2.3 million barrels, the US Energy Information Administration (EIA) said on Wednesday.

The increase in petroleum supplies in the US, which comprises about a quarter of the world oil market, comes at a critical time of the year when petrol demand typically surges due to warmer weather and heavy vacation planning.

Despite the increase in stock levels, oil and petrol supplies in the US remain below year-ago levels in the aftermath of a series of supply interruptions over the winter from Venezuela, Nigeria and Iraq.

Adding selling interest to world oil markets, Indonesian Energy Minister Purnomo Yusgiantoro said Wednesday Opec did not need to consider cuts in oil output while prices were inside Opec's US$22-US$28 per barrel band.

"Our interest is the price stays above US$22 per barrel. If prices stay above that, then there is no need for Opec to cut quotas," Yusgiantoro said.

CONTINUED WEAKENING

Some Opec ministers had hinted that a cut might be on the cards at next week's meeting in Qatar as a resumption in Iraqi oil exports looms, but prices have risen strongly toward the upper end of Opec's target range.

Opec's reference export price stood at US$27.09 on Tuesday.

"Now that a consensus appears to be emerging within Opec that a production cut at its meeting next week is not necessary, we expect crude oil prices to continue weakening over the next few days," Barclays Capital Research said in a report.

War-torn Iraq has suspended exports since the US-led war began in March and the authorities expect the first tankers to lift crude from storage tanks in the middle of June.

Previous targets for resuming exports have been put back because of unexpected problems with looting and sabotage.

The head of Iraq's southern oil company, which produced most of Iraq's crude before the war, said on Wednesday output there was just a fraction of pre-war levels because of the security problems.

Total Iraqi output now stands at 750,000 barrels per day, about a quarter of pre-war levels, although Iraqi authorities in Baghdad expect it to double by the middle of the month.

Paul Stevens, professor of petroleum policy at Britain's University of Dundee said the looting and sabotage indicated that current forecasts for Iraqi exports were far too high.

"People are grossly underestimating the time it will take to restore pre-war capacity in Iraq," he said. "The US and Britain don't have the troops on the ground or the administration to do it."