ICE Brent falls back to $60 despite OPEC move to cut output

London (Platts)--10Oct2006

ICE Brent crude futures in London fell Tuesday despite the ongoing
tension surrounding North Korea and moves towards a possible OPEC output cut,
brokers said.
Traders and brokers said the market remained weak technically, and that
OPEC was failing to give a clear signal of its intentions on suppply.
The front-month November Brent contract was trading down 52 cents at
$60.02/barrel at 1104 GMT, hovering around the intra-day low so far.
November WTI futures on ICE were trading 44 cents off Monday's settle at
$59.52/barrel.
Several OPEC ministers have backed a cut in output of 1 million b/d in
recent days to prevent a further slide in prices, although a formal
announcement has yet to be made. Ministers are also yet to arrive at a
consensus on how to share the output cut and whether to hold a formal meeting
to rubber-stamp the agreement.
"OPEC is all over the place at the moment, we need to know what precisely
they are going to do," said one broker.
"Technically the market looks like a rejection of the highs," said
another broker.
Separately, Iran said Tuesday it was "hostile" towards the development of
nuclear weapons, a day after North Korea claimed an atomic weapons test, but
said major had to start disarmament, AFP reported.
"The Islamic Republic is hostile to the production and utilization of
nuclear weapons and to destruction," government spokesman Gholam Hossein Elham
was reported as saying.
Brent futures continue to trade at a premium to WTI, with the spread
between the two grades at around 50 cents.
Crude stocks in the US are still well above the five-year average level,
which could be one reason why the market is so heavily contangoed in the US.
According to the latest data from the US Department of Energy, crude
stocks in the US are nearly 40 million barrels above the five-year average at
328.1 million barrels.
Major oil companies are also said to be good sellers of the arbitrage
between WTI and Brent, brokers said.
--Paul Wightman, paul_wightman@platts.com

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