Crude futures jump as OPEC agrees to cut crude production

London (Platts)--14Dec2006

Global crude futures leapt on Thursday as OPEC agreed to cut crude
production by a further 500,000 b/d, according to an OPEC delegate as
ministers of the oil cartel met in the Nigerian capital Abuja Thursday .
At 12:01 GMT the January ICE Brent futures contract changed hands at
$62.74/barrel, up $1.41/barrel from Wednesday. The WTI futures on NYMEX and
ICE also rallied by $1.20/barrel to $62.58/barrel.
"The sudden jump in prices is all down to OPEC's decision," a
London-based broker said.
A delegate said there was agreement that the cut should be 500,000 b/d
and that it would "most likely" be implemented from the beginning of
February.
OPEC agreed in Doha in October to remove 1.2 million b/d of physical oil
from world markets from the beginning of November, setting a production target
of 26.3 million b/d for the 10 members, not including Iraq, bound by output
agreements.
One senior official said Thursday that OPEC appeared to have cut just
700,000 b/d of the agreed 1.2 million b/d.
While market players were primarily focused on the OPEC meeting, traders
earlier in the day said that the latest US inventory figures had also led to
stronger crude futures prices. The Energy Information Administration reported
a 4.3 million barrel drop in US commercial crude stocks, higher than the 1.6
million barrel draw projected. A marked drop in US imports, possibly triggered
by loading problems at the LOOP, was unable to offset an unexpected decline in
throughputs. Refinery utilization fell 1.4% to 89.1%, according to the EIA, in
contrast to expectations for a rise of 0.5%.
Concerning weather-related market issues, milder temperatures across the
Atlantic Coast are expected to prevail a while longer, according to
Accuweather. For the upcoming weekend, temperatures of up to 18 degrees
Fahrenheit, above-average for this time of the year, can be expected in
Pittsburgh. This results in a rather gloomy outlook for heating oil demand,
with US distillates stock levels likely to remain at surpluses against the
average.
Product prices were stronger on the back of OPEC's decision, with January
ICE gasoil futures rising by $6.75/mt to $554.50/mt on Thursday. On NYMEX,
January heating oil futures traded 3.25 cents higher at $1.7645/gallon, whilst
the RBOB contract rose 2.40 cents to $1.6461/gallon.
--Jean-Luc Amos. jean-luc_amos@platts.com
--Verena Peternell, verena_peternell@platts.com

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