ICE Brent rises back above $58/barrel, awaits direction from US

London (Platts)--3Nov2006

ICE Brent futures rose slightly Friday, waiting to see if the US would
provide direction later in the day with little fundamental news moving the
market, brokers said.
At 1206 GMT, the December ICE Brent futures contract was changing hands
at $58.40/barrel, up 53 cents, recovering from an intra-day low of
$57.78/barrel, near a level which seems to be providing support, traders said.
"Fundamentally very little is happening and from this we've been stuck in
this $57-$58 range throughout most of the week. Despite this, volumes are
good," a London-based broker said.
Later in the day, some market players feel that the front-month contract
could test the year's low of $57.39/bbl, as it seems the support level of
$58/barrel was successfully broken on Thursday.
The fall followed news that Royal Dutch Shell had restored 47,000 b/d of
Nigerian output after protesters disrupted operations last week.
Market players noted how attitudes have changed from earlier in the year
with regard to pre-empting seasonal events.
In 2005, many US Gulf Coast refineries and oil platforms were brought off
line by a heavy hurricane season. Earlier this year hedge funds piled long
into the crude and gasoline markets, not only in anticipation of the US summer
driving season, but also reacting to early forecasts of a repeat occurrence of
a heavy hurricane season in the Gulf Coast, brokers said. However, when the
hurricanes did not materialize, prices corrected and returned lower.
"The market is confused as there was talk of a cold winter in the
northern hemisphere but after getting it wrong for the hurricane season this
year, players seemed more wary going in long on heating oil and crude," a
broker said.
Recent weather reports have shown the upcoming winter is expected to be
warmer than the 30-year average over much of the US, though cooler than last
year's very warm winter season, the National Oceanic & Atmospheric
Administration of the US Department of Commerce said October 19.
A milder winter means less demand for heating oil and natural gas,
products that typically drive the energy complex at this time of the year.
As a result, traders said the market was not particularly bullish on
heating oil, despite three weeks of consecutive stock draws in the US.
Elsewhere, OPEC secretary general Mohammed Barkindo said Friday that OPEC
may cut production further when it meets on December 14 if the 1.2 million b/d
output cut agreed by ministers on October 19 does not result in a more
balanced market.
"I would not be surprised if they cut more," Barkindo said.
OPEC, which pumps more than a third of the world's oil, announced at an
emergency meeting on October 19 it would cut 1.2 million b/d of production
from November 1, but so far that has failed to halt the drop in prices.
--Jean-Luc Amos, jean-luc_amos@platts.com

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