Crude futures were weaker Monday as the US dollar index recovered from
all-time lows and the market resumed its early position after a
misunderstanding of a remark made by Saudi Arabian oil minister Ali Naimi on
Sunday.
Further to this, North Sea production disruption from bad weather was
tightening the spread between Brent and ICE. Also, bad weather in the Black
Sea has affected loadings and shipping over the weekend.
The mixed messages and news of production problems came at the start of
a week that could be the most volatile for crude oil markets in years,
according to analysts.
December ICE Brent futures at 11:15 GMT were down 42 cents to
$92.76/barrel. The NYMEX WTI contract for the same month was pegged at
$95.40/b down 92 cents, with the spread between the two benchmarks tighter by
50 cents since Friday's settlement.
In early Asian trading crude prices fell by $1/b as the US dollar
climbed against other currencies, moving the index away from lows of 75
points. In mid-morning European trading the dollar had gained over a cent
against the euro and the pound.
Meanwhile, Saudi Oil Minister Ali al-Naimi dangled the possibility of a
boost in oil output in comments Sunday. "This (increase in output) is
premature but we will discuss the issue when we meet," he told reporters in
Kuwait.
However prices recovered as Iran's OPEC governor, Hossein Kazempour
Ardebili, clarified Monday that OPEC would not discuss an increase in crude
oil supply when ministers and heads of state and government from OPEC member
states meet in Riyadh on November 15-18, the official Iranian news agency IRNA
reported (see story at 09:39 GMT).
On Sunday, it was not clear whether Naimi was referring to the meeting in
Riyadh later this week or its next formal policy meeting on December 5 in Abu
Dhabi.
In a note to clients on Friday, analyst Edward Morse of Lehman Brothers
warned that the week ahead on crude futures could be particularly volatile as
speculators try to push prices above $100/b before the December NYMEX WTI
contract expires.
Morse said that with 360,000 contracts still outstanding and in the hands
of financial not physical players it was going to be "crowded at the exits,"
as hedge funds and banks have to get out of those contracts before Friday.
"That they are still in Dec 07 futures suggests to us that speculators
are aiming for $100 before December futures expire," Morse said.
Product futures were mainly lower. November ICE gasoil, expiring at
midday GMT, was $3.50/mt lower at $828.00/mt. December heating oil lost 68
points to $2.6120/gallon, while the RBOB contract was at $2.45385/gal, down
1.75 cents.
--Jean-Luc_Amos, jean-luc_amos@platts.com