TODAY.AZ / Business

Oil prices drop below US$59 a barrel after jump on cold U.S. weather

05 February 2007 [17:44] - TODAY.AZ
Oil prices fell in profit-taking Monday after rising nearly US$2 a barrel last week as forecasts of a cold snap in the United States raised expectations of higher demand.

Light, sweet crude for March delivery dropped 22 cents to US$58.80 a barrel on the New York Mercantile Exchange by afternoon in Europe. Brent crude for March delivery on the ICE Futures exchange lost 19 cents to US$58.22 a barrel.

The Nymex contract on Friday rose US$1.72 to settle at US$59.02 a barrel on colder-than-normal U.S. weather and supply worries driven by a second round of OPEC production cuts.

Oil prices had earlier fallen as low as US$49.90 a barrel after an unseasonably warm January.

"The market is just looking at the current cold weather in the U.S. and taking long positions" based on it, said Tetsu Emori, chief commodities strategist at Mitsui Bussan Futures in Tokyo.

Heating oil prices rose 0.18 cent to US$1.6858 a gallon while natural gas futures gained 33 cents to US$7.806 per 1,000 cubic feet.

Oil prices had also been supported Friday by concerns the two main Nigerian oil workers' unions would hold a strike this week in protest of rising violence in Africa's biggest petroleum producer. The planned Monday strike was called off pending a meeting with President Olusegun Obasanjo.

The 20,000-strong blue- and white-collar unions had threatened the work stoppage after an increase in the number of kidnappings and oil-industry attacks across the southern Niger Delta area, where most of crude in Africa's oil giant is pumped.

Also in Nigeria, officials said Sunday hostage takers released nine Chinese oil-worker captives.

Expectations that the Organization of Petroleum Exporting Countries will tighten their spigots further are also likely to shore up crude oil prices.

"Once again this week there were few comments from OPEC members and those that did speak emphasized a consensus to implement existing cuts rather than announce further reductions," said Eoin O'Callaghan, an analyst at BNP Paribas.

"And while a speculative point, it is worth noting that the recent rebound in front month (March) crude futures is also consistent with a tightening of compliance by OPEC after the January fall."

The Wall Street Journal reported last week that Saudi Arabia has advised its customers of its impending 158,000 barrel a day output cut effective Feb. 1. The reduction is part of a December agreement by OPEC to cut output by 500,000 barrels a day on top of an earlier production cut of 1.2 million barrels a day. The Associated Press

/The International Herald Tribune/


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