Oil falls on high US stocks forecast, OPEC supply13:25,...

Oil falls on high US stocks forecast, OPEC supply
13:25, Wednesday, 4 May 2005

By Joanne Collins

MELBOURNE, May 4 (Reuters) - Oil prices retreated further below $50 a barrel on Wednesday, ahead of data expected to show a sustained rise in crude stocks in the United States and as OPEC cranked up production.

U.S. light crude traded down 5 cents to $49.45 a barrel, extending the previous day's almost 3 percent loss at $49.50, the lowest closing level since Feb. 18.

Prices have fallen around 15 percent from a record $58.28 struck on April 4. London Brent crude edged down 6 cents to $50.46 a barrel, after losing more than 1 percent on Tuesday.

"What we are seeing is a coinciding of increased OPEC supply over the last couple of months and we are entering a soft patch for demand," said Mark Pervan, Melbourne-based analyst at Daiwa Securities.

"But this is not likely to last and I expect prices to move up again as demand starts to pick up in late May, early June for the summer driving season."

Analysts polled by Reuters forecast commercial crude oil inventories in the United States, the world's largest energy consumer, increased by 1.0 million barrels last week due to soaring imports, rising for the 11th time in 12 weeks.

Gasoline and heating oil supplies might have each risen by 700,000 barrels on average, as demand softened, the poll showed.

Analysts said news OPEC's output rose in April also led to the market's weakness.

NO GLUT

OPEC production rose 130,000 barrels per day (bpd) last month as the group boosted output to increase global stockpiles and lower record-high oil prices, a Reuters survey showed.

"Provided OPEC can keep producing as much as it can, I think prices should moderate," said David Thurtell, commodities strategist at Commonwealth Securities.

Total April output from the Organization of the Petroleum Exporting Countries rose to 29.83 million bpd, up from a revised output of 29.70 million bpd in March, the survey of consultants, shippers, industry and OPEC sources showed.

But Saudi Arabia, the world's largest exporter, dismissed concerns of a crude oil glut despite increasing U.S. inventories, adding that the kingdom would allow global oil stocks to build ahead of winter.

"I don't know that it's reached that level yet, where we'll worry about oversupply," Saudi foreign affairs adviser Adel Al-Jubeir told Reuters. "We are allowing inventory levels to build in anticipation of the heating season."

Saudi Arabia is pumping slightly above 9.5 million bpd of
oil, and has about 1.5 million bpd in untapped reserves, mostly heavier crude grades, Jubeir said, ading that it had offered the supplies to customers, but "we really haven't had any takers".

He declined to say whether the kingdom would pump above 10 million bpd in May.

The market was also reminded of the frailty of supplies that had contributed to the high prices over the past year, as crude output from Venezuela, the world's No. 5 exporter, was cut by 100,000 bpd.

President Hugo Chavez said on Tuesday the loss in output from the country's western region was due to production problems triggered by negligence and possible sabotage.

(c) Reuters Limited 2005
REUTER NEWS SERVICE