LONDON, June 2 - U.S. oil prices climbed to a six-week high near $30 a barrel on Monday as traders reacted to a stubborn deficit in U.S. stockpiles and a potential output cut from OPEC. By London midday, U.S. crude futures were up 30 cents at $29.86 a barrel -- their highest level since April 22. Benchmark Brent crude gained 28 cents to $26.60 a barrel, just 50 cents away from a two-month peak.
Oil prices have rallied more than four percent since the middle of last week, when U.S. government data showed crude oil stockpiles were stuck 12 percent below last year's levels while gasoline tanks fell to a six percent deficit. Coming in the week leading up to the start of the summer driving season, when U.S. demand for motor fuel peaks, dealers feared a potential price spike. "With global inventory still at extremely low levels and particular concern over low product and crude oil inventory in the U.S., there is little obvious sign of any significant weakness," said Barclays Capital analyst Kevin Norrish in a daily report. The U.S. Energy Information Administration said implied gasoline demand in the week to May 23 climbed to 9.3 million barrels per day (bpd), 600,000 bpd higher than a year ago.
The big stock deficit has been accompanied by signs that the Organisation of the Petroleum Exporting Countries could be preparing to announce an output cut at a meeting next week, despite the fact that prices remain above its $25 target. "Paradoxically the price strength of the past couple of days makes a production cut...less likely," Norrish said. "If OPEC does cut production it will be reacting to perceived weakness in market fundamentals later on this year." Venezuelan Oil Minister Rafael Ramirez said last week that the cartel might cut its ceiling by up to one million bpd at the June 11 meeting, but any decision hinges on the extent and speed of recovery of Iraq's battered oil industry. Iraqi officials are targeting output of some 1.5 million bpd by mid-June, about half its pre-war level. Baghdad is expected to sell later this week some eight million barrels of crude oil stored in tanks on the Turkish Mediterranean coast, but the timing of sustained supplies as yet remains unclear. The head of the International Energy Agency, Claude Mandil, said last week that a production cut was unwarranted due to Iraq's slow recovery and thin stockpiles.//