IPE Brent futures climb on Chinese crude demand head of OPEC meet

London (Platts)--30May2006

IPE Brent futures in London surged higher Tuesday on new Chinese crude
demand figures and ahead of OPEC's Thursday meeting in Caracas, where the
group is expected to keep its 28 million b/d ceiling unchanged, brokers said.
At 1251 London time (1151 GMT) the July IPE Brent futures contract was
trading at $71.45 /barrel, up 86 cents having risen over a dollar to an
inter-day high of $71.99/barrel just after 1200 London time.
Deborah White, senior energy analyst at Societe Generale, said that an
increase in demand of between 8% and 10% in April is a sign that Chinese
refineries are becoming more aggressive due to the prospect of higher domestic
fuel sale prices.
China imported 17.34% more crude in the four-month period at 49.15
million mt, compared to the same period in 2005, Chinese customs data showed.
Meanwhile, OPEC ministers gathering in the Venezuelan capital Caracas for
a meeting Thursday to decide on third-quarter output policy were widely
expected to leave their 28 million b/d ceiling unchanged. The group pumped
30.01 million b/d in April, the highest since November 2005, according to a
Platts survey.
On Monday, Kuwaiti oil minister Sheikh Ahmed Fahed al-Sabah lent support
to the idea of the cartel maintaining status quo. "Kuwait would like to
continue with the same production level just to show the market that the
security of supply will continue and try to bring the prices to a more stable
level," Sheikh Ahmed said.
His UAE counterpart Mohammad Dhaen al-Hamli said OPEC would maintain its
current production levels, even though there was no shortage of crude oil in
the market, because oil prices remained high, the country's official WAM news
agency said.
Hamli said crude prices were expected to remain high this year and that
demand for crude oil through the rest of 2006 would continue at the same rate
as 2005. A fair price for the OPEC crude basket -- suitable to producers and
consumers -- would range between $50-60/barrel, the minister said.
Venezuelan oil minister Rafael Ramirez is the only OPEC minister so far
to have mooted that the producers' club reduce output. "Market fundamentals
indicate that there should be a cut in production," Ramirez told a press
conference in Caracas May 22. "There is more than enough oil in the market."
Bullish factors still outweigh bearish signals in the oil market, with
geopolitics still at the center stage. Nigeria's Niger Delta strife is still
festering and no resolution is in sight to the row over Iran's nuclear plans.
Coinciding with OPEC's meeting Thursday, the five permanent members of
the UN Security Council plus Germany are to meet in Vienna to discuss Iran's
nuclear program, AFP quoted a Chinese foreign ministry spokesman as saying
Tuesday. Tehran, for its part, is sticking to its refusal to halt sensitive
uranium enrichment work.
The country would study European proposals to end the crisis, the foreign
ministry in Tehran said Tuesday, but added none had been received so far.

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