ICE Brent curbs fall after trading to 2006 low on US product fear

London (Platts)--31Oct2006

Crude futures in London inched higher after Monday's huge product-led
sell off pushed the front-month December ICE Brent futures contract $2.4
lower, or to a new 2006 low.
Prices also fell on comments by Kuwaiti Oil Minister Sheikh Ali al-Jarrah
al-Sabah, who said OPEC was unlikely to fully implement its agreement to cut
output by 1.2 million b/d starting November 1.
The front-month December ICE Brent futures contract was trading just 6
cents higher at $58.74/barrel having been as low as $58.02/barrel earlier in
the day. The low of $58.02/barrel is the lowest level since end of November
2005. ICE WTI for December was trading 5 cents weaker at $58.31/barrel.
"The market feels very negative, but its unlikely prices will fall back
to $50 per barrel," one broker at Bache Financial said.
The market appeared to be looking towards the expiry of the US products
market to more clearly define
future price direction.
"Should the US products and crack spreads fall heavily when the US market
opens, crude futures are likely to fall much further," the Bache Financial
broker said.
Ample supplies of gasoline and heating oil in New York Harbor, home of
the NYMEX delivery point, sent product prices plummeting Monday. Inventories
are still at comfortable surpluses against yearly averages despite refinery
maintenance programs in the US. Evidence of ample supply was seen in the
contango in the front of both the RFG and RBOB curves.
The crude markets on both sides of the Atlantic remain at very high
levels. The announcement by the Kuwaiti minister Monday that the OPEC output
cuts would unlikely show any real effect until mid or end November failed to
lend support.
The dated to frontline swap, which measures the spread between dated
Brent and the frontline ICE Brent futures contract was trading at a discount
of $2.15 per barrel, its lowest level since Platts began assessing the swap in
2002.
Physical traders said they doubted that the supply situation would
improve even if refiners returned from maintenance, boosting demand for crude
oil.
--Paul Wightman, paul_wightman@platts.com

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