Brent crude remained well supported in late morning trade on a further drop in US inventory levels reported yesterday. Prices were also underpinned by fears of further shortages as prospects of war with Iraq remained on the horizon, and by 1140 were up 59c at USD36.66. Pledges by OPEC to provide extra oil in the event of war failed to take the heat out of the market, dealers said. Weekly inventory data released yesterday by the US Department of Energy showed US distillate stocks at fresh 20 month lows, while crude stocks were seen falling again to reach levels only just above 28 year lows.
Analysts said US crude prices hit a post-Gulf War high yesterday as freezing weather in the US northeast continued to boost demand for domestic heating fuel. The combination of historically low inventory levels and fears over further shortages ahead of possible war with Iraq have held OPEC's crude basket price above the cartel's upper target of USD28.00 a barrel since mid-December. One analyst warned that if US inventories fell further they could hit levels where refineries would be forced to shut in production. ///www.fxcentre.com