ICE Brent falls as market covers positions after Monday's rally

ICE Brent falls as market covers positions after Monday's rally

London (Platts)--7Nov2006

ICE Brent futures in London traded lower on position covering Tuesday
after rallying Monday on a Nigerian production shut-in, talk that OPEC might
cut output further and a product driven rally, brokers said.
At 1106 GMT, the December ICE Brent futures contract traded at
$59.69/barrel, down 6 cents from Monday's settle.
"We're seeing a little covering today after the spook the market got on
Friday and Monday due to news from Nigeria," a London-based broker said.
On Monday, armed protesters forced Agip, a subsidiary of Italy's Eni, to
close down its 50,000 b/d Tebidaba crude flow station in Nigeria's southern
Bayelsa state.
Production had to be shut in to safeguard company staff, a spokesman
said. The flow station feeds the 200,000 b/d Brass crude export terminal.
Around 500,000 b/d of Nigerian crude remains shut in the Western Delta, mainly
as a result of attacks on infrastructure.
The US also warned Friday that it had learned that a militant group may
have completed plans to launch further attacks on oil facilities in the
region.
Despite, position covering on Tuesday, market players feel that
front-month December ICE Brent could be testing yesterday's high of
$60.40/barrel once again later in the day.
"Currently we're still seeing traders buying dips and selling rallies,
keeping us in this range, but we may moving up later in the day as
expectations of Wednesday's US crude and product stock data become clearer," a
trader said.
Market sources cited a strong resistance level of $61.60/barrel for
December Brent and a support level of $58.80/barrel.
"If we pass through those levels and settle outside of them then I think
the market will take note as it will definitely provide some direction," a
broker said.
OPEC President Edmund Daukoru and Saudi Arabia's oil minister Ali Naimi
both hinted this week at further output cuts at the cartel's December 14
meeting in Abuja, Nigeria.
Daukoru said on Tuesday that oil markets were "clearly oversupplied and
current prices were still low." He hinted at further output cuts in December
but declined to say by how much production will be lowered.
Asked if the market was in balance after OPEC's October 19 decision to
cut production from November 1, the Saudi minister replied: "The market is not
in balance. The inventories are very high." But it still "remains to be seen"
whether or not the cut will have OPEC's desired effect of balancing the
market, he said.
OPEC ministers agreed in Doha last month to cut output by 1.2 million b/d
from November 1 in a bid to prevent a further slide in prices.
--Jean-Luc Amos, jean-luc_amos@platts.com

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