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Oil Little Changed After Rising as OPEC May Maintain Output
By Sophie Tan and Gavin Evans
Dec. 4 (Bloomberg) -- Crude oil was little changed in New York after rising from a five-week low yesterday on speculation OPEC members may keep output unchanged this week.
The oil market ``is very well supplied'' and doesn't need more production from the Organization of Petroleum Exporting Countries, Libya's top oil official told reporters late yesterday. Twenty-three of 42 analysts, or 55 percent, expect the group to maintain output at current levels when they meet in Abu Dhabi tomorrow, according to a Bloomberg News survey.
``I don't think OPEC will raise production because there has been little supply-side geopolitical tensions,'' said Steve Rowles, an analyst with CFC Seymour Ltd. in Hong Kong. ``The U.S. inventory numbers out tomorrow could affect oil prices more.''
Crude oil for January delivery was at $89.25, down 7 cents, in after-hours electronic trading on the New York Mercantile Exchange at 4:14 p.m. in Singapore. Earlier, oil rose as much as 67 cents, or 0.8 percent, to $89.98 a barrel.
The contract rose 60 cents, or 0.7 percent, to $89.31 a barrel yesterday, leaving prices 9.6 percent below the record $99.29 reached on Nov. 21. Prices fell to $87.14 yesterday, the lowest since Oct. 24, after a report showed manufacturing in the U.S., the world's largest oil consumer, expanded at the slowest pace in 10 months in November.
Iran, Weapons
Iran halted its nuclear weapons program four years ago and hadn't resumed it as of mid-2007, according to declassified portions of the latest U.S. National Intelligence Estimate released yesterday. Even if the program were restarted, Iran wouldn't be able to produce enough material for a bomb until 2010 at the earliest, the report said.
The latest assessment could complicate President George W. Bush's drive for stiffer international sanctions on the Iranian government, said White House National Security Adviser Stephen Hadley. Any reduction in tension between the U.S. and Iran would help to limit gains in oil prices and lower the pressure on OPEC to raise production, CFC Seymour's Rowles said.
An Energy Department report tomorrow will probably show U.S. crude-oil stockpiles fell 900,000 barrels last week, based on the median estimate from a Bloomberg News survey of 10 analysts. Inventories held 313.2 million barrels on Nov. 23, or 3 percent more than the five-year average for the period.
Gasoline
Gasoline stockpiles probably gained 1.2 million barrels, while distillates, including heating oil and diesel, probably declined by 150,000 barrels, based on the survey.
Oil prices plunged last week after crude oil stockpiles fell less than forecast, even as refiners unexpectedly increased operating rates to a 10-week high. Analysts are picking refining rates to have risen to 89.5 percent, the fourth increase in five weeks.
``The market could be very volatile around some of these announcements,'' said Tom Hartmann, commodity broker at Altavest Worldwide Trading Inc. in Mission Viejo, California. ``The market really needs to get back above $90-$91 to have some sort of bullish footing again.''
Brent crude oil for January settlement traded at $89.67 a barrel, down 13 cents, on the London-based ICE Futures Europe exchange at 4:14 p.m. Singapore time. Earlier, the contract rose as much as 65 cents, or 0.7 percent, to $90.45 a barrel. Yesterday, it closed at a premium to the Nymex futures for the first time since July.
``Brent has been definitely the better performer'' in recent weeks,'' Altavest's Hartmann said. ``It could be some sort of bet on the dollar. The world is shifting to a different product as their standard.''
Refining Capacity
Oil refiners would be unable to absorb an increase in OPEC output because of constraints on the amount of crude they can turn into fuels, potentially causing prices to drop below $80 a barrel, Merrill Lynch & Co. said in a report e-mailed yesterday.
``The incremental supply of crude oil will likely exceed the market's ability to refine it'' because of limited growth in processing capacity, Merrill analysts led by Francisco Blanch said in the report.
Refiners have limited means to increase their cracking capacity, or the ability to turn more of the heavy oil typically produced by OPEC countries into lighter fuels such as gasoline and naphtha, according to Merrill. This constraint indicates additional OPEC supply may exceed demand.
To contact the reporters on this story: Sophie Tan in Singapore at sophietan@bloomberg.net ; Gavin Evans in Wellington at gavinevans@bloomberg.net
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