LONDON – Responding to fears of huge seasonal increases in U.S. gasoline prices, and with crude oil up 27% this year in London, oil prices fell after OPEC pledged to pump as much as the market needs and as U.S. stockpiles indicate supplies are adequate.
"OPEC has continued to make statements that it will keep the market well supplied," said Christopher Bellew, a broker with Bache Financial Ltd. in London. "We're vulnerable to a sell-off with comfortable stocks of crude and gasoline in the U.S. after such strength in the market."
The Organization of Petroleum Exporting Countries (OPEC), producer of about
40% of the world's oil, said in a statement that it could add at least another two million barrels a day of output if necessary.
At its meeting in Isfahan, Iran on March 16, OPEC isn't expected to discuss an output reduction with oil above $50 a barrel, the state-owned IRNA news agency said on its Web site, citing Iran's OPEC Governor Hossein Kazempour Ardebili.
"Inventories are high as they can be," said Anthony Nunan, manager for international petroleum business at Tokyo-based Mitsubishi Corp. "It's only the longer-term picture where there is a concern about supply."
Hedge-fund managers and other large speculators last week had their biggest bet on higher oil prices since June, according to Commodity Futures Trading Commission data. "Funds have been aggressive, and they probably already covered their requirements," Bellew said.
Oil demand is rising as the U.S. and Chinese economies expand and production may fail to catch up later this year, investors say. The International Energy Agency forecasts global consumption will advance to a record 84 million barrels a day this year, up 1.8% from a year ago. That's equivalent to the content of about 42 supertankers, known as very large crude carriers, being burnt every day.
Spare production capacity from OPEC, with respect to current output, should exceed three million barrels a day by the end of 2005, the group said in a statement March 6. A production increase to meet rising consumption would reduce the margin available to cope with disruptions to supply.