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OIL FUTURES: Nymex Crude Falls On Saudi Comments January 29, 2007

Posted by notapundit in Economic News.

NEW YORK (Dow Jones)–Crude oil futures fell Monday after Saudi Arabia’s ambassador to the U.S. implied prices aren’t too low for the oil-producing kingdom, leading to speculation OPEC won’t push for further production cuts.

Current crude prices are “adequate to meet the requirements of producing and consuming countries,” Saudi Arabian ambassador Turki al-Faisal said. Saudi Arabia is by far the biggest oil producer in the Organization of Petroleum Exporting Countries.

Also weighing on prices were forecasts for builds in gasoline and crude oil inventories in closely watched U.S. government data due Wednesday.

“The Saudi comments likely deflated some of the bulls’ hopes that the Saudis would cut more production,” said Kyle Cooper, director of research at IAF Advisors in Houston. “Preliminary expectations for the inventory data is on the bearish side too.”

The front-month March light, sweet crude contract on the New York Mercantile Exchange settled $1.41, or 2.5%, lower at $54.01 a barrel. Brent crude on the ICE futures exchange fell $1.61 to $53.68 a barrel.

OPEC in December agreed to cut an extra 500,000 barrels a day of production from Feb. 1, adding to 1.2 million barrels a day of cuts supposed to have started Nov. 1. Most analysts believe the cartel has fallen well short of its initial cuts, a view backed up by a Dow Jones Newswires survey that showed the group had by December cut just 600,000 barrels a day of production from October levels.

U.S. crude imports are expected to have risen by 1.2 million barrels in the week ended Jan. 26, according to a survey of analysts by Dow Jones Newswires. Gasoline stockpiles are expected to gain 1.6 million barrels in data due Wednesday at 10:30 a.m. EST while distillate stockpiles, which include heating oil and diesel, are seen falling by 2.6 million barrels.

“There’s an overall build in petroleum being looked for,” said IAF’s Cooper, adding that distillate stockpiles should be sufficient to last through the rest of the season, even if cold temperatures persist.

February heating oil fell 4.25 cents, or 2.7%, to $1.5489 a gallon. Front-month reformulated gasoline blendstock for oxygen blending, or RBOB, fell 4.24 cents to $1.4410 a gallon.

The comments from Saudi Arabia’s al-Faisal won’t be taken as gospel by analysts. He sent crude prices down in October when he said the kingdom’s aim was to bring oil prices down to “reasonable levels.” This was shortly before OPEC ministers met and announced its first 1.2 million barrel-a-day cut.

Al-Faisal also said that not only would a nuclear-armed Iran be a “nightmare” but so would a U.S. military strike on Iran to interrupt Tehran’s nuclear program.

Following are prices for selected Nymex and ICE contracts and their comparison to values at the prior day’s settlement. Highs and lows include levels hit in overnight trade.

Nymex Prices:
Contract Settle Change Vs Low High
Mar crude oil 54.01 -141 53.75 55.96
Apr crude oil 54.77 -148 54.65 56.75
Feb heating oil 154.89 -425 154.70 161.22
Mar heating oil 155.72 -442 155.55 162.15
Feb RBOB 144.10 -424 144.00 149.25
Mar RBOB 147.40 -410 147.10 152.50

ICE Prices:
Contract Settle Change Vs Low High
Mar ICE Brent 53.68 -161 53.56 55.83
Apr ICE Brent 54.44 -154 54.37 56.43
Feb gasoil 493.50 -50 490.00 502.00
Mar gasoil 497.75 -50 494.50 506.00

By Matt Chambers, Dow Jones Newswires


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