Oil Jumps as U.S. Fuel Stocks Fall

Wed June 11, 2003 02:55 PM ET By Andrew Mitchell

NEW YORK (<a href=asia.reuters.com>Reuters) - Oil prices forged new post-Iraq war highs on Wednesday after the U.S. government reported another decline in low fuel stocks and the OPEC cartel decided to meet again next month to consider cutting supply.

U.S. light crude in New York CLc1 was up 60 cents at $32.33 a barrel, hitting a peak of $32.50, the highest level in 12 weeks and nearly 35 percent above last year.

In London, benchmark Brent crude LCOc1 was 29 cents higher at $28.37 a barrel.

Prices jumped as the Energy Information Administration said U.S. crude oil stocks fell 4.6 million barrels to 284.4 million barrels last week, dropping more than 12 percent below last year. Traders had expected a small stock build.

Low inventories and delays in the resumption of Iraq's postwar oil exports enabled a meeting of the OPEC producer cartel in Qatar on Wednesday to put off making fresh supply cuts.

The group which controls around half the world's oil exports decided to meet again in just seven weeks on July 31 in case recovering Iraqi exports undermine high prices.

"Because of the uncertainty at the moment on the world market we want to meet as often as possible," said Iran's OPEC governor Hossein Kazempour Ardebili.

"Frequent meetings convey to the market the message that OPEC is being very vigilant and will take measures if necessary, and that keeps prices up," Ardebili added.

Iraq will this month ship its first crude since mid-March but looting and sabotage at oil facilities means that exports will be well below prewar levels.

The 3-month halt to Iraq's crude exports have prevented U.S. crude inventories from rebuilding after disruptions in Venezuela and Nigeria ran down supplies earlier this year.

After falling from 12-year highs near $40 after Middle East oil facilities escaped the U.S.-led invasion of Iraq without much damage, prices have rebounded to levels which can further undermine already weak economic growth.

"Bottom line in this market is that people keep worrying about low stocks and today's statistics did nothing to allay those fears," said Peter Beutel, analyst at Cameron Hanover.

High natural gas prices are bolstering oil demand at a time when consumption normally takes a seasonal dip. Some utilities are able to switch to oil burning for power generation if natural gas prices get too high.

Federal Reserve chief Alan Greenspan warned on Tuesday that that tight natural gas supplies could force up prices across the energy complex in the event of a cold winter.

U.S. crude imports last week dropped 6 percent from near record levels above 10 million barrels per day in recent weeks. U.S. refiners have been running above 96 percent of capacity in recent weeks to prepare for summer vacation gasoline needs.

Gasoline inventories rose 2.6 million barrels to 209.9 million barrels -- easing supply concerns fueled by a recent spate of operational problems at U.S. refineries.