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Financial Times: Crude prices fall as Opec upbeat on capacity: “And with about 65 per cent of US crude production still shut after the hurricanes and the threat of strike action at Shell’s Rotterdam refinery (Europe’s biggest)…”: Posted Tuesday 1 November 2005

 

By Neil Dennis

 

Oil prices fell on Monday following comments from officials at the Organisation of Petroleum Exporting Countries that the cartel had sufficient spare capacity to meet demand.

 

Opec said it expected oil prices to stabilise in a range of $45-$55 a barrel next year, with ample capacity to meet demand.

 

Adnan Shihab-Eldin, acting secretary-general of the group, said on Monday that Opec’s spare capacity of 2m barrels a day would be more than adequate to cover demand this winter.

 

This reiterated earlier comments from the cartel’s president Sheikh Akhmad al-Fahd al-Sabah, who said the group had spare capacity and that demand was falling. He added that Opec had offered extra crude deliveries in the aftermath of Hurricanes Katrina and Rita, but there had been no takers.

 

Recent data pointed to falling demand for petrol in the US after the hurricane season pushed prices to all-time highs. In New York, gasoline futures were down 4.52 cents to $1.579 a gallon, but with winter approaching in the northern hemisphere, attention was starting to turn towards supplies of heating oil when US inventories are examined later in the week. But with warm weather dominating, heating oil futures were down 6.1 cents to $1.7825 a gallon.

 

Analysts offered differing opinions on where the energy market would head next.

 

Walter Zimmerman, technical analyst at United Energy, said charts pointed to a bearish downwards trend and most attempts at a rally had ended in “abject failure”. He added: “With a bearish seasonal influence, our conclusion is that the path of least resistance is still to the downside.”

 

But Deborah White, energy strategist at Société Générale, said that demand growth from China was starting to rise again as central government action, which slowed demand in the first half, eased.

 

“Our calculations show that apparent demand ramped up from 3.7 per cent in August to 6.3 per cent in September, and our Chinese contacts tell us that current imports and refinery run levels imply growth continuing to accelerate in October and November,” she said.

 

And with about 65 per cent of US crude production still shut after the hurricanes and the threat of strike action at Shell’s Rotterdam refinery (Europe’s biggest), oil product markets were likely to be well supported in the near term, said Kevin Norrish at Barclays Capital.

 

By the close of trade in New York on Monday, Nymex West Texas Intermediate for December delivery was down $1.46 at $59.76 a barrel. On London’s International Petroleum Exchange, December Brent was down $1.32 at $58.10 a barrel.

 

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