Oil Rises to 5-Week High

Crude oil rose to a five-week high above $50 as Kuwait and Qatar indicated they will implement supply cuts announced by OPEC last month, and a dispute between Russia and Ukraine reduced natural gas shipments to Europe.
TradingEconomics.com, Bloomberg 1/6/2009 5:28:47 AM

Kuwait and Qatar plan to cut oil shipments to Asia starting in January, refinery officials in the region said today, after the Organization of Petroleum Exporting Countries agreed on a record output reduction on Dec. 17. OAO Gazprom cut gas shipments to Europe through Ukraine to less than one third of normal levels, a NAK Naftogaz Ukrainy spokesman said.

Oil for February delivery gained as much as $1.66, or 3.4 percent, to $50.47 a barrel in electronic trading on the New York Mercantile Exchange. That’s the highest since Dec. 1. It was at $50.03 at 1:23 p.m. London time.

Brent crude oil for February settlement climbed as much as $2.24, or 4.5 percent, to $51.86 a barrel on London’s ICE Futures Europe exchange, also the highest since Dec. 1. The contract traded at $51.37 a barrel at 1:23 p.m.

Oil also advanced as the conflict between the Israeli army and Hamas reached its 11th day, with pitched battles in the Gaza Strip. Iran, the second-largest producer in OPEC and a supporter of Hamas, has called for a suspension of crude exports to allies of Israel.

OPEC decided to cut production by 4.2 million barrels a day from September levels at a Dec. 17 meeting in Algeria in response to tumbling prices, which last year had a record drop of 54 percent.

Kuwait, OPEC’s third-largest producer in November, will reduce shipments of oil sold under long-term contracts by 5 percent starting Jan. 22, said refinery officials. Qatar, the group’s second-smallest producer, will slash cargoes by as much as 6 percent in February, compared with 5 percent in January.

The U.S. Energy Department is scheduled to release its weekly report at 10:30 a.m. tomorrow in Washington.

U.S. crude stockpiles probably increased 1 million barrels in the week ended Jan. 2, from 318.7 million the week before, according to the median of seven analyst estimates.