Oil prices ease on OPEC assurances

16-May-05

Assuarances from OPEC on Sunday that the supplies are exceeding 30 million bpd, a 25 year high, against an official ceiling of 27.5 million bpd, triggered a slump in the market. Oil prices eased on as OPEC pledged to keep pumping at almost full tilt, despite abundant crude stockpiles in the United States. U.S. crude oil prices slumped to US$48.45 a barrel, a fall of almost 17% from the record highs of US$58.28 in early April. Brent crude oil slipped to US$48.36 a barrel. OPEC is scheduled to meet on June 15 to plan its production for the second half. It was indicated that US$40 a barrel was an acceptable price for the cartel's basket of crude oils, nearly US$6 below its current level. Middle East Gulf oil producers have been raising output since March to build up stocks ahead of Q4, when demand for OPEC oil is expected to rise to 30.5 million bpd. A number of OPEC members have discounted any possible cuts to supply despite the current softer market. Have oil prices reached a bottom? The market has a little bit more downside to go, but it will be constrained by peak demand over the U.S. driving season, starting in late May - the main driver on prices over the next couple of weeks. A stronger dollar, jumping to a 7 month peak on the euro and a one-month high against the yen on Monday curbed oil's chances for a recovery by capping speculative buying. A stronger U.S. currency makes dollar-denominated oil more expensive for investors using other currencies. The market would also get some support as mixed signals were emerging on China's appetite for crude oil and oil product imports.While the International Energy Agency said last week demand growth in China, Europe and the U.S. was less than expected, customs data showed on Friday that China's April crude oil imports surged 23% on a year ago to hit an all-time monthly high of 12.25 million tons. However, China's oil products imports fell 37% in the first 4 months as ith increased its reliance on its own refineries to feed demand.