Oil above $97 ahead of Opec meet, Greek polls
London, June 13, 2012
Brent crude oil gained on Wednesday, with investors awaiting the outcome of the meeting this week of the producer group Opec, while gains were capped by worries about Europe's debt crisis and prospects for oil demand.
Iran's oil exports have fallen by an estimated 40 per cent since the start of the year as Western sanctions tear into the country's vital oil industry, the International Energy Agency said on Wednesday.
Brent crude gained 36 cents to $97.50 a barrel by 1058 GMT. It had slipped to as low as $96.67 earlier in the session. US crude fell 15 cents $83.17 per barrel.
The IEA report was seen as effectively calling on Opec to maintain current high oil output levels to help ailing Western economies struggling with high energy prices.
However, the report left the market little moved.
"The IEA confirmed that there are stock builds and they don't want to say that the market is over-supplied, but it's not a game-changer in terms of prices and the market is still well-supplied," Olivier Jakob at Petromatrix in Zug said.
He added that a focus on Greek parliamentary elections at the weekend would likely drive further volatility.
Investors are watching for any change in the Organization of the Petroleum Exporting Countries' output policy, with price hawks calling on Saudi Arabia to rein in excess production.
An oil price below $100 is damaging to Libya's reconstruction, Libya Oil Minister Abdulrahman Ben Yazza said. However others nations are hoping for more oil price weakness.
A sustained $10 per barrel increase in crude prices reduces growth in developing countries by 1.5 percent, India's oil minister, S. Jaipal Reddy, said on Wednesday in Vienna, where the Opec meeting is being held.
Opec and the U.S. government agreed on Tuesday that global oil markets could weaken further in the second half of the year, with prospects for demand dimming.
In another bearish signal for oil prices, the U.S. Energy Information Administration in its monthly report on market fundamentals cut its forecast for oil demand growth this year by 150,000 barrels per day to 810,000 bpd as the European crisis weighs on demand.
Brent has fallen from a peak of more than $128 a barrel in March, prompting calls from exporters such as Venezuela to stem a slide that has knocked $30 a barrel off prices.
Saudi Arabia has lifted output to 10 million barrels a day, its highest in decades, to help nurse global economic growth in what Saudi Oil Minister Ali al-Naimi has called a "type of stimulus" for the economy.
That has taken supply from the Organization of the Petroleum Exporting Countries to 31.6 million barrels a day in May, an Opec report said on Tuesday, well above the official 30-million bpd target it set in December.
Greece, US data watched
The Greek elections over the weekend, which may determine whether the country stays in the euro zone, are also weighing on crude prices as further chaos in the single currency region may affect global demand for oil.
Raising the stakes further, the UK's finance minister said Europe may need to sacrifice Greece's membership of its single currency bloc, and Austria's finance minister said Italy might need a financial rescue because of its high borrowing costs.
While the Austrian comment drew a sharp denial from Italy, it stoked fears that Europe is far from ending 2-1/2 years of turmoil.
Data on crude stockpiles in the world's top oil consumer, the United States due at 1430 GMT, will also be watched for clues on how well supplied the market is.
U.S. crude stocks climbed unexpectedly last week thanks to a large increase on the West Coast, although stockpiles in the key Cushing storage hub declined, data from the American Petroleum Institute (API) showed on Wednesday.
Crude inventories rose by 1.6 million barrels, contrary to analysts' expectations in a Reuters poll for a draw of 1.4 million. The EIA numbers are due later in the day. – Reuters