ICE Brent recovers after early dip as OPEC cut deal draws near

ICE Brent recovers after early dip as OPEC cut deal draws near

London (Platts)--11Oct2006

ICE Brent futures recovered after an early dip on Wednesday as the market
awaited firm action by OPEC on a proposed 1 million b/d production cut
following days of inconclusive negotiation.
The front month Brent contract earlier fell through the crucial
$59/barrel support level, indicating weak technicals, market players noted.
At 1032 GMT the November Brent futures contract traded at
$59.46/barrel, up 12 cents on Tuesday's close. The front-month contract had
earlier fallen to an intra-day low of $58.59/barrel in electronic trade before
recovering. On Tuesday November Brent shed $1.20/barrel, falling through the
important psychological $60/barrel level.
The November ICE WTI futures contract was unchanged at at $58.52/barrel.
Market players are waiting to see if OPEC reaches an agreement to slash
its 28 million b/d ceiling by 1 million b/d. OPEC has yet to make a formal
announcement on its agreed cuts. Qatari oil minister Abdullah al-Attiyah said
Wednesday there was consensus for a cut of 1 million b/d from actual
production and an announcement would be made in two to three days or at an
emergency meeting. He said Qatar backed a cut.
Iran, OPEC's second biggest producer, said it would cut its production by
by 140,000 b/d if OPEC reaches an agreement on reducing crude output.
"In case of the agreement of all OPEC members to decrease the output
ceiling by the proposed one million b/d, Iran's oil production will be cut by
about 140,000 b/d," Iranian oil ministry, Javad Yarjani was quoted as saying
by the semi-official Fars news agency.
He said OPEC members hoped to announce the result of their consultations
on the proposed reduction "in a few days," after which the cartel would issue
a statement.
OPEC President Edmund Daukoru of Nigeria has sent letters to the 10 OPEC
members who are party to the quota system asking that they consider reducing
output by 1 million b/d, a move that would bring the nominal ceiling down to
27 million b/d.
With the lack of any concrete decision by OPEC, the petroleum market is
turning its attention to Thursday's US inventory report by the Energy
Information Administration and the American Petroleum Institute.
US commercial crude inventories are expected to show a build of 1.8
million barrels when the weekly data is released Thursday by the EIA and API,
with the ongoing refinery turnaround season crimping demand.
Crude stocks stood at 328.1 million barrels in the week ending September
29, 22.7 million barrels above year-ago levels and 39.4 million barrels above
the five-year average.
Analysts polled by Platts were expecting a draw in distillate stocks of
350,000 barrels, but that is a seasonal occurrence, with consumers along the
Atlantic Coast filling their heating oil tanks ahead of the winter season.
Overall, distillate inventories in the US at 151.5 million barrels are
sitting 23.5 million barrels above year-ago levels and 24.9 million barrels
above the five-year average.
This week's US data is out a day later than usual due to the Federal
government being closed on Monday for Columbus day.
--Jean-Luc Amos; jean-luc_amos@platts.com

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