Oil prices held at post-Gulf War highs on Monday, awaiting first signals from OPEC producers that they would carry through last month's agreement to cut supplies to the world market from April 1. Buyers of crude from major suppliers such as Saudia Arabia, Kuwait and Iran are waiting for notification in the next few days of the volumes they will receive next month, which should be lower than in March due to OPEC's planned cut. Low fuel stocks in the United States, the world's biggest consumer, as well as political turmoil in Venezuela, the fifth-largest oil exporter and a major supplier to the U.S., are keeping oil prices bubbling above $30 a barrel at levels not seen since just before the U.S. invasion of Iraq last year.
U.S. light crude struck an intraday peak on Monday at $37.39 at 0711 GMT, a rise of 13 cents from Friday's settlement in New York. London's benchmark Brent crude traded 15 cents higher at $33.50 a barrel. "The market is all about supply at the moment and a belief that OPEC can maintain control over prices. Inventories are low and as long as barrels do not show up in inventories, prices will stay high," said Sydney-based ABN AMRO analyst Paul Ashby. OPEC President Purnomo Yusgiantoro said on Monday the group would guarantee oil supplies to the market at times of high prices, but would go through with the planned cut on April 1. "OPEC has an automatic adjustment on prices. When prices are above $28, OPEC guarantees supplies," Purnomo told reporters. But when asked whether OPEC would still implement production curbs next month, Purnomo said: "That we will do, there is no decision to review," Purnomo said. The Organisation of the Petroleum Exporting Countries agreed in February to reduce production by one million barrels per day (bpd) from April 1 and to eliminate about 1.5 million bpd of excess output above official production limits with immediate effect.
FUNDS BET ON HIGHER PRICES
Algerian Oil Minister Chakib Khalil said on Saturday that political tensions in Venezuela and Iraq, both OPEC members, and gasoline stock worries in the United States were behind the oil price rally rather than any supply problem. The International Energy Agency (IEA), which advises 26 nations on energy policy and security, criticised OPEC on Monday, saying markets should be left to decide price and stock levels and that the current rally was hurting developing countries. "We would welcome a restoration of more normal stock patterns and flows and a little bit less effort to micro-manage, and let the market manage the ebbs and flows itself," William Ramsay, IEA deputy executive director, said at an oil conference in Auckland, New Zealand. "We are a little perplexed by the idea of a cut on April 1 as it really won't take effect in the market until some time in May or June, and we are going into the driving season when refineries are running flat out to meet gasoline demand," Ramsay said. Low stocks of crude and gasoline in the United States have raised fears of a supply crunch in the summer, when demand for motor fuel peaks during the holiday season.
Oil prices are also being driven higher by funds, or non-commercial speculators, who have taken out record long positions in U.S. gasoline futures and near-record long positions in crude futures in essentially a bet that prices will go higher. According to the Commodities Futures Trading Commission on Friday, non-commercial speculators amassed 48,723 net longs in gasoline and 82,451 net longs in crude futures, the highest level in U.S. crude futures since September 1999. "The principal creators of this bull run remain the investment funds, which are maintaining and ever increasing their long positions..." said SG Securities in an research note. "So long as U.S. economic growth remains strong, Chinese oil demand rises nearly 10 percent each year, and American interest rates do not increase, there is little likelihood that the "global macro" funds will cut their long positions in oil," SG said.///