Oil Extends Gains

Crude oil rose for a second day on speculation that reduced OPEC production in January will curb global inventories and bolster prices.
TradingEconomics.com, Bloomberg 2/4/2009 2:12:29 PM

OPEC output averaged 28.57 million barrels a day last month, down 3.5 percent from December, according to a Bloomberg News survey of oil companies, producers and analysts. The United Arab Emirates and Qatar plan to extend reductions in crude-oil shipments in March, according to refiners.

Crude oil for March delivery rose 19 cents, or 0.5 percent, to $40.97 a barrel in electronic trading on the New York Mercantile Exchange at 7:58 a.m. Singapore time. Yesterday, futures rose 70 cents, or 1.8 percent, to settle at $40.78. Prices are down 8.6 percent this year and 54 percent from a year ago.

The Organization of Petroleum Exporting Countries, responsible for more than 40 percent of global oil supply, agreed on Dec. 17 in Oran, Algeria, to lower production as oil prices headed for their first annual decline since 2001.

OPEC members with output quotas, all except Iraq, pumped 26.2 million barrels a day, 1.36 million more than their target of 24.85 million barrels a day, according to data compiled by Bloomberg.

Saudi Arabia, OPEC’s biggest producer and the world’s top oil exporter, cut output by 375,000 barrels a day last month to an average 8.025 million barrels a day, the lowest since December 2002. Production was 26,000 barrels a day lower than its target of 8.051 million barrels a day, the Bloomberg survey showed.

The U.A.E. and Qatar plan to reduce their crude oil shipments to Asia in March in line with OPEC cuts, said refiners who received notices from suppliers.

State-owned Qatar Petroleum will slash supplies of its Marine grade sold under long-term contracts by 15 percent, following a 6 percent cut in February, said the refinery officials in Singapore, China, Japan and South Korea, who asked not to be named, citing confidentiality agreements.

Abu Dhabi National Oil Co., the Emirates’ state-owned producer, will cut supplies of Murban oil by 10 percent after a 15 percent reduction in February, said the officials. Shipments of Upper Zakum grade will be reduced by 15 percent, Umm Shaif by 10 percent and Lower Zakum by 10 percent, similar to cuts in volume last month.

The price of oil for delivery next January is 31 percent more than for the current month, increasing the opportunity for traders to profit from storing crude for later use. This structure, in which a future month’s price is higher than the one before it, is known as contango.

Volume in electronic trading on the exchange was 392,505 contracts as of 3:02 p.m. in New York yesterday. Volume totaled 498,610 contracts Feb. 2, up 1.8 percent from the average over the past three months. Open interest yesterday was 1.26 million contracts. The exchange has a one-business-day delay in reporting open interest and full volume data.

Falling prices and lower fuel demand have hurt energy company earnings. BP Plc, Europe’s second-biggest oil company, posted its first quarterly loss in seven years. The fourth- quarter loss was $3.3 billion, or 18 cents a share, compared with net income of $4.4 billion, or 23 cents, a year earlier, London-based BP said yesterday in a statement.

Brent crude oil for March settlement increased 26 cents, or 0.6 percent, to end the session at $44.08 a barrel on London’s ICE Futures Europe exchange yesterday.