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MARKET WATCH: Non-US crude prices finish 'moderately' higher

Amid thin liquidity during the Jan. 16 holiday in the US to honor the birthday of civil rights leader Martin Luther King Jr., Brent crude futures for February delivery expired 70¢ higher at $111.20/bbl, noted Barclays Capital analysts. “Shrugging off the much expected S&P downgrades to 16 European economies, oil prices posted moderate gains,” Barclays analysts said, adding that news flow was limited for the day.

Some key news was heard out of Nigeria, however, as that country’s president, Goodluck Jonathan, gave way and compromised with the unions by reinstating part of the gasoline subsidy. Barclays analysts said this was “much in line” with their expectations, adding that “no oil production was halted and, indeed, given that oil workers remain the best paid in the industry and oil the largest source of revenue for the government, a compromise midway was the most likely outcome.”

Other important news was heard out of Vienna from the Organization of Petroleum Exporting Countries, which released its monthly Oil Market Report. The OPEC Secretariat “made very few changes to its oil balances,” Barclays analysts noted, adding that global oil demand was expected to grow by 900,000 b/d in 2011 (a slight upward revision of 30,000 b/d) and 1.06 million b/d in 2012 (a downward adjustment of 10,000 b/d).

Barclays analysts said, “Non-OPEC supply prospects have seen yet another downward revision (seventh in a row, down from the forecast of 660,000 b/d in June), having factored in the reality of a myriad of technical and geopolitical outages. The latest downward revision of 50,000 b/d pegs 2011 growth at 130,000 b/d, bringing it closer to other key agency forecasts, although the Secretariat remains the most optimistic relative to the [International Energy Agencey] (60,000 b/d), [the US Energy Information Administration] (who revised its forecast downwards by a large 310,000 b/d in its latest report to 90,000 b/d), and our own forecast (growth of -10,000 b/d).”

James Zhang at Standard New York Securities Inc., the Standard Bank Group, noted that Saudi Arabia has drawn a new line in the sand as Saudi Oil Minister Ali Al-Naimi stated for the first time in a TV interview that the kingdom wants to keep the oil price at the $100/bbl level, “substantially above the $75/bbl level, which was indicated by the kingdom as a ‘fair price’ back in 2008.”

Zhang said, “The raised expectation by Saudi was not surprising after a jump in public spending amid the unrest in the Middle East and North Africa region last year. In fact, the IMF estimated that Saudi needs at least $80/bbl to balance its budget, while Iran, Iraq, and the UAE need an oil price somewhere between $80 and $100[/bbl]."

The New York Mercantile Exchange floor was closed Jan. 16.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes fell 4¢ to $111.71/bbl.


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