IPE Brent falls ahead of expected US crude stock draw

IPE Brent falls ahead of expected US crude stock draw

London (Platts)--1Jun2006

Front-month IPE Brent futures in London Thursday retreated to below the
$70/barrel mark ahead of the US stock data release and the OPEC meeting in
Caracas, where ministers are expected to maintain the group's current 28
million b/d output.
At 1028 GMT, the July IPE Brent futures contract was changing hands at
$69.98/barrel, down 43 cents from the Wednesday settle.
On Wednesday, the energy complex plummeted as the US shifted policies by
offering to join the European-led negotiations with Tehran. US and Iran broke
off diplomatic ties 26 years ago.
But as July Brent neared the support level of $69/barrel, prices
rebounded by almost $1.50 to settle at $70.41/barrel.
"The olive branch offered by the US seems to be the main reason for the
fall yesterday and today the fall seems to be on the back of expected
unchanged OPEC output levels and builds in US gasoline stocks," a London-based
broker said.
Hedge funds are also having a strong impact on market prices.
"Funds have been surging in and out of the market. Open interest levels
on Tuesday were a lot higher than previous sessions as the funds computer
programs wait for pre-programmed flat prices to be reached, which triggers a
buy or sell," a broker said.
Iran Thursday responded by saying it was ready for negotiations, but did
not accept conditions set by Washington for a dialogue, that it first freeze
its atomic program.
Diplomats in Washington said the move was linked to an effort to get
China and Russia to ease categorical opposition to UN sanctions on Iran if
negotiations stalled.
In the Venezuelan capital of Caracas, OPEC's ministerial output
monitoring committee was to recommend to the ministers that they maintain the
group's 28 million b/d ceiling later Thursday.
Increasing the ceiling -- which has been in place since July 1, 2005 --
in the hopes of bringing prices down is not seen as a serious option for the
time being with most members already pumping close to capacity.
Market players seem to have accepted the likely outcome of the OPEC
meeting. "I can't see there being any change in OPEC's output level for the
time being," a trader said.
At 1530 London time, the American Petroleum Institute and Energy
Information Administration will release US oil inventory data for the week
ending May 26. Analysts polled by Platts are expecting a draw in commercial
crude stocks of 1.4-million barrels.
"More of the same - crude stocks in their normal seasonal draw as
refiners limit imports and hefty stockbuilds for gasoline and distillate
despite deliveries of gasoline and diesel rising ahead of Memorial Day
weekend, official kick-off of the US summer "driving season,"" Deborah White,
energy analyst at Societe Generale, said in a note.
Analysts were expecting a build in gasoline stocks of 1.9 million barrels
and a rise of 1.4 million barrels in distillate stocks.

For similar stories, take a trial to Platts Oilgram Price Report at
http://www.platts.com/Request%20More%20Information/

Please visit: www.platts.com

Their coverage of energy matters is extensive!!.