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Prices rebound with proposed cut of OPEC production

Sam Fletcher
Senior Writer

HOUSTON, Dec. 29 -- Energy prices rebounded Dec. 28 as the Iranian oil minister's call for a production cut by members of the Organization of Petroleum Exporting Countries in January superseded recent forecasts of warmer weather in major US markets.

Kazem Vaziri-Hamaneh, Iran's oil minister, wants OPEC ministers to cut oil production by 1 million b/d at their scheduled meeting Jan. 31, reported the Al-Sharq newspaper in Qatar. But it wasn't clear if Vaziri-Hamaneh meant a nominal cut in OPEC's official production ceiling of 28 million b/d or the actual curtailment of the group's overproduction, which has been estimated as high as 2 million b/d.

Crude stocks increase
Meanwhile, the US Energy Information Administration said Dec. 29 that commercial US stocks of crude increased by 100,000 bbl to 322.6 million bbl during the week ended Dec. 22. However, US gasoline inventories tumbled by 1.2 million bbl to 202.9 million bbl in the same period. Distillate fuels fell by 900,000 bbl to 126.8 million bbl, with a drop in heating oil overcoming a slight rise in diesel.

Imports of crude into the US increased by 330,000 b/d to nearly 10.2 million b/d during the same week. The input of crude into US refineries was up by 165,000 b/d to 15.1 million b/d, with refineries operating at 88.9% of capacity—the highest level since Hurricane Rita hit the Gulf Coast in September.

With no new refineries built in this country since 1976, the US is becoming increasingly dependent on imported petroleum products as it is on imported crude, said energy consultant Wood Mackenzie Ltd., Edinburgh, in a recent report.

Total gasoline imports into the US averaged 960,000 b/d last week, said EIA.

Wood Mackenzie said some 12 million b/d of new refining capacity is being built through expansion projects, nearly all of which are outside the US. Most of that new capacity is being built by Saudi Arabia, who has ambitions to be a major supplier of value-added downstream products as well as the biggest source of crude.

Energy prices
The February contract for benchmark US sweet, light crudes jumped Dec. 28 by more than $2 to as high as $60.45/bbl before closing at $59.82/bbl, up by $1.66 for the day on the New York Mercantile Exchange. The March contract as up by $1.68 to $60.36/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., advanced by $1.66 to $59.82/bbl. Gasoline for January delivery jumped by 7.77¢ to $1.59/gal on NYMEX. Heating oil for the same month rose by 4.55¢ to $1.68/gal.

The expiring January natural gas contract escalated by 40.9¢ to $11.43/MMbtu on NYMEX, "rising for the first time in four sessions on forecasts of cooler weather in the Southeast next week," said analysts at Enerfax Daily.

EIA reported the withdrawal of 162 bcf of natural gas from US underground storage in the week ended Dec. 23. That matched the amount withdrawn the previous week, exceeded the latest consensus by Wall Street analysts, and was down from a withdrawal of 178 bcf last year. US gas storage now stands at 2.6 tcf, down by 234 bcf from the same time last year but 33 bcf above the 5-year average.

In London, the February contract for North Sea Brent crude gained $1.35 to $57.64/bbl on the International Petroleum Exchange. Gas oil for January delivery increased by $4.25 to $500.25/tonne.

The average price for OPEC's basket of 11 benchmark crudes increased by 59¢ to $51.73/bbl on Dec. 28.

Contact Sam Fletcher at

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