The price of oil firmed in London on Wednesday after fresh figures overnight showed a fall in US crude oil stock levels, while few analysts were betting on a policy shift from OPEC at its summit this week in Caracas.
Benchmark Brent North Sea crude oil for November delivery was trading at 30.90 dollars a barrel here, up from from 30.60 dollars at the opening and 30.42 at the close on Tuesday.
Analysts said that the price increase could be explained largely by figures from the American Petroleum Institute (API) released on Tuesday showing a fall of 2.24 million barrels in US crude oil stock levels.
"It's certainly on the back of the API figures," said Prudential Bache analyst Mark Keenan. He said that the price increase had been accelerated "by the fact that we've had quite a strong three days of support in the market around the 30.35- to 30.00-dollar mark."
That support followed "initial weakness that was caused by the SPR (US strategic petroleum reserve) comments from the United States." The US government announced on Friday that it would tap 30 million barrels of oil from the strategic oil reserve over 30 days.
Leo Drollas at the Centre for Global Energy Studies said prices were bouncing back because "the fundamentals don't justify very much lower prices than these."
"The froth has come off because of the announcement effect of 30 million barrels coming in October, which is quite a lot of oil in a month," he said.
"It obviously lost a lot in the first two or three days and now it's coming back."
European Union finance ministers are expected to discuss the possibility of releasing oil from their own emergency reserves when they meet in Brussels in Friday.
Analysts said the emergency reserves were stocks that oil companies were required to maintain, but they were uncertain whether EU governments were likely to force oil companies to sell the reserves. "We don't know how they're going to play this one," said Drollas.
Keenan said: "I think it's more political. I don't see it happening." Comments from EU officials showed little support for the idea. A spokesman for EU Energy Commissioner Loyola de Palacio said on Tuesday that the strategic oil reserves of European Union countries had to be used "only in the event of extreme necessity."
And a spokeswomen at the International Energy Agency said its member countries had "absolutely" no need to draw on stocks of oil. The Organisation of Petroleum Exporting Countries (OPEC) is to meet in Caracas on Thursday and Friday for its 40th anniversary, but few analysts were predicting any surprise policy announcements to come out of the summit.
According to the GNI brokerage: "The Caracas meeing is being seen by most outsiders as a back-slapping exercise by the cartel to congratulate itself on its new-found strength, and no major decisions are expected."
Another production hike was unlikely from OPEC anyway, said Keenan, as it could cause prices to tumble.
"OPEC seems to be reluctant to flood the market with oil because as soon as the winter's over ... the situation where prices could suddenly collapse to nothing is obviously more apparent."
"The winter's going to be over soon and it still takes 30 days to get oil from Saudi Arabia to anywhere in the world," noted Keenan.
Such a reluctance, coupled with a cold winter, could cause prices to push higher, analysts said.
"I think that prices will trend higher, pending on what happens on the November 12 OPEC meeting," said Keenan. "If they don't release any more oil I think that we will move higher."—AFP.
©--Agence France Presse.
© 2000 Mena Report (www.menareport.com)