Oil Prices Slip on Doubts of OPEC Cuts

By SINGAPORE Posted 06 November 2006 @ 11:37 am EET     Print     Reprint     E-Mail     Comments

Oil prices slipped Monday after threats late last week of disruptions to production in Nigeria and the United States failed to materialize. Also, traders are doubtful about OPEC's ability to follow through on its pledge to cut production.

High crude inventories and seasonally weak demand are other contributing factors in keeping prices from rising above $60 a barrel range, said Victor Shum, an energy analyst at Purvin & Gertz in Singapore.

While oil prices have retreated significantly from a summertime high above $78 a barrel, they have been trading in a range of around $57-$61 a barrel over the past month as traders look for demand clues in weather and economic forecasts and weigh them against OPEC's plans to curb supplies by 1.2 billion barrels a day.

"Some market participants doubt OPEC's cohesion, and they don't want to run the risk of being caught short in case the weather changes and prices surge ahead," Shum said. Light, sweet crude for December delivery dropped 46 cents to $58.68 a barrel in midafternoon Asian electronic trading on the New York Mercantile Exchange. December Brent crude on London's ICE futures exchange fell 45 cents to $58.70 a barrel.

On Friday, prices jumped after U.S. diplomats warned that militants in Nigeria were preparing a major new wave of attacks and kidnappings across the country's oil-rich delta region. A bomb hoax Friday at a huge BP PLC refinery in Whiting, Indiana, had also helped raise prices.

Nigeria was calm over the weekend. Since the beginning of the year, militants have taken dozens of oil workers working in the southern oil region hostage. The violence has pared about one quarter from Nigeria's normal 2.5 million barrel daily production.

Last week, U.S. crude oil inventories rose by 2 million barrels to 334.3 million barrels in the last week. Demand is currently low as the cold winter season in the Northern Hemisphere has yet to set in. "In the short term, I expected the market to be rangebound in the high $50s," Shum said. "Potentially, deeper into the winter, there may be a strengthening of prices to the low 60s."

In other Nymex trading, heating oil dropped 0.85 cent to $1.6690 a gallon and gasoline futures fell 1.89 cent to $1.4880 a gallon. Natural gas futures dropped 18.4 cents to $7.700 per 1,000 cubic feet.