Oil Prices Stabilize on Talk of OPEC Cut

Posted 07 November 2006 @ 08:55 am EET     Print     Reprint     E-Mail     Comments

SINGAPORE (AP) - Oil prices stabilized Tuesday after climbing nearly a dollar on threats of violence in Nigeria and a suggestion that OPEC may need to further cut its output.

Light sweet crude for December delivery rose 3 cents to $60.05 a barrel in midmorning Asian electronic trading on the New York Mercantile Exchange. Prices jumped 88 cents in Monday's trading after armed protesters shut down a Nigerian oil pumping station.

Oil prices have retreated significantly from a summertime high above $78 a barrel, 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 million barrels a day.

Some members of the Organization of Petroleum Exporting Countries are concerned that prices have already fallen far enough from their July peak above US$78 a barrel. OPEC President Edmund Daukoru, also Nigeria's oil minister, said the oil cartel may need to further cut its output.

"The market is clearly oversupplied, clearly oversupplied," Daukoru told reporters Monday during a visit to South Korea. On Tuesday, he said OPEC doesn't have a specific price floor or band that it wants to defend. Setting a target price band "is not really applicable to the fluid, free market," he said.

Still, Daukoru described the current price of oil as "low." Regarding OPEC's decision last month to cut production effective Nov. 1, he said the effects of the reduced output have yet to be seen, but would be soon. Daukoru told reporters that when OPEC meets in December they will discuss production, "but it looks as if some further mopping up will be necessary."

In Nigeria on Monday, protesters invaded an oil pumping station in southern Bayelsa State and forced workers to shut it down. The facility is run by Agip, a subsidiary of Italian energy company ENI SpA. Since the beginning of the year, militants have taken dozens of oil workers 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. Demand is currently low as the cold winter season in the Northern Hemisphere has yet to set in. Nymex heating oil futures fell marginally to $1.7176 a gallon, while natural gas futures dropped 15.4 cents to $7.336 per 1,000 cubic feet.