LONDON, Feb 20 - Oil prices pushed up within sight of 11-month highs on Friday after a build in U.S. crude stocks did little to ease concerns about supplies. London Brent crude futures were up 30 cents at $31.12 a barrel, a dollar below post-Iraq war highs above $32 hit in mid-January. U.S. light crude was trading 10 cents lower at $35.90 a barrel after topping $36 on Thursday. Brent has jumped more than $2 since the OPEC oil cartel agreed last week to cut production quotas by four percent from April 1, threatening to stop any rebuild in U.S. crude inventories which are languishing near 28-year lows.
While the U.S. government reported a 4.9 million barrel increase in crude stocks last week, a large concentration of the build was on the U.S. West Coast, which is isolated from the rest of the U.S. market. A drop in crude stocks in the Midwest, which includes the Cushing, Oklahoma, delivery point for oil traded on the New York Mercantile Exchange, was more significant for the price, analysts said. "Despite this large crude build there was actually a draw of 1.1 million barrels in PADD 2 (Midwest) which is what may be getting our price up," said Katherine Spector, energy strategist at Deutsche Bank. OPEC last week also pledged to rein in 1.5 million bpd of supply it has been producing over existing quotas as it seeks to stop spare stocks building in the second quarter when demand declines after the northern winter.
Analysts say OPEC's decision to cut output showed its determination to stop supplies swelling, even though traders have reported no sign yet of any members reducing sales, with March crude allocations to key customers unchanged from February.
"OPEC has declared the extent of the first tranche of oil that it is prepared to cut in order to defend prices, and has signalled that more cuts will be made if necessary," said Barclays Capital in a report. "We do not believe that OPEC will need to make a large cut, and that the greater danger is that it will remove too much oil from the market," he added. Venezuelan Oil Minister Rafael Ramirez said on Thursday OPEC's decision to reduce crude output from April remained firm and that the group could cut production again to defend prices. "The decision to cut is firm. If we see the need to cut again, we will do it," he told reporters at a gas conference in the eastern coastal city of Cumana.//