Oil prices eased on Tuesday after OPEC signalled it was pumping above official limits, but stayed close to post-Iraq war highs. Low U.S. fuel stocks and political tension in Venezuela, OPEC’s third biggest producer, have intensified supply concerns.
Despite earlier pledges to stop quota-busting, the head of the Organisation for the Petroleum Exporting Countries on Tuesday said the group was still pumping above official output limits to try to cool prices, which are close to levels hit in the run-up to the U.S. invasion of Iraq in March last year.
U.S. light crude touched a peak at $36.98 a barrel before easing 19 cents to last stand at $36.67. London’s Brent crude fell 22 cents to $33.12 a barrel.
OPEC President Purnomo Yusgiantoro said the group needed to pump extra oil to stem the price rally that has added more than $4 a barrel to the crude price since OPEC’s February 10 decision in Algiers to eliminate oversupply and cut output by one million barrels per day from April 1.
“Indeed at this time we have to produce more,” Purnomo told reporters when asked whether it was realistic to cut excess production at a time when U.S. crude is approaching $37 a barrel.
“I think our friends in OPEC automatically will keep that policy so leakage is possible so that prices don’t go any higher and will be in the range of $22-$28. This is an automatic adjustment,” Purnomo, also Indonesia’s oil minister, told reporters
Violence in Venezuela between National Guard troops and protesters against President Hugo Chavez provided further price support as traders recalled the general strike begun late in 2002, which brought the country’s oil sales to a halt.
Market analysts and Venezuelan oil customers saw little danger of Chavez carrying out his threat to cut oil supplies to the U.S. in case of an invasion or blockade, but traders were still wary that there could be some disruption.
“I don’t see anything to get in the way of oil prices staying strong, though I think the top is quite near,” said Edward Meir of Man Energy. “All the cylinders are moving. Physical markets are very strong and there is unrest in Venezuela.”
OIl stocks data
Supply concerns could be heightened on Wednesday when the U.S. government Energy Information Administration (EIA) releases its weekly report on U.S. commercial fuel stocks.
Eight analysts polled by Reuters forecast inventories would fall across the barrel, including crude oil, partly because of the closure of the Mississippi River pass after a ship collision and also as refiners shut plants for maintenance.
The survey predicted U.S. crude stocks would fall by 1.92 million barrels in the week to February 27, depleting tanks that are already close to levels not seen since the mid-1970s.
Oil prices could also be boosted by the EIA’s data for gasoline stocks, which analysts predicted would fall by one million barrels.
U.S. gasoline stocks should be building at this time of year ahead of the peak demand summer vacation season, but they have declined in recent weeks because of a series of maintenance closures and production glitches.
