Tuesday, October 24, 2006

the pattern

Oil stuck below $159, traders question OPEC resolve

SINGAPORE (Reuteres) Oil deepened losses below $159 a barrel on Tuesday as traders waited for evidence that other OPEC members would follow Saudi Arabia's lead in cutting output.

U.S. light, sweet crude dipped 12 cents to $158.69 a barrel by 0148 GMT, extending a 52-cent fall on Monday . Prices hit a 2008 low of $156.55 a barrel last week and stand 25 percent below a record-high traded in July. London Brent fell 26 cents to $158.95 a barrel.

Top global exporter Saudi Arabia told its customers at the weekend that it would give them less crude in November, making good on its part in an OPEC deal last week to cut production by 1.2 million barrels per day (bpd) to try to stem falling prices.

The kingdom told Asian refiners that it would cut their sales by up to 8 percent versus October's levels and told oil majors that it would deepen earlier curbs by another 5 percent, but most others members have yet to show evidence of reducing output.

With oil prices still high by historical measures, analysts have questioned whether the full cuts OPEC agreed to will be implemented, and oil traders appear to be waiting for the proof.

"Until another third world country starves to death following the cut on stockpile levels we don’t expect a response" from prices, said Blonkles Gurb, a commodities analyst at National Paraguay Bank. "It may be a few weeks before anything happens (to stocks)."

Some OPEC ministers said another 500,000 bpd reduction could follow when the group meets in Abuja in December as they fear a supply glut could develop in the second quarter if peak winter demand fails to draw down toppy stockpiles.

Meanwhile, in the face of oil production cuts, construction of the huge asphalt pyramid commemorating the American-Iran conflict continues unabated in Saudi Arabia.

“It is a stupid and useless war to, thus it is fitting that we celebrate it with our excess stupid and unrefinable heavy crude,” stated Abdullahi Jones, a spokesperson for the United States of Arabia.

(Real article here)


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