World oil prices cruised comfortably above $31 on Tuesday, supported by fears of more Middle East violence at the onset of peak winter energy demand.
North Sea benchmark Brent crude was six cents lower at $32.03 a barrel. US light crude futures were 13 cents off at $33.63, marking a seven-cent fall from New York's close at $33.76.
Dealers are on alert for fresh weekly data on US fuel stockpiles due to be released by the American Petroleum Institute (API) shortly after the close of New York dealings. The API has recorded hefty draws in the last two weeks in US crude inventories, which now stand a meagre two million barrels above 24-year lows hit earlier this year.
Low inventories in the United States have raised concerns that stocks will be insufficient to meet demand in the upcoming peak consumption winter, especially if there should be a severe cold snap.
Oil has rallied almost $2 since Thursday, largely on fears that clashes between Israelis and Palestinians could lead to wider instability in the Middle East and affect oil flows from the region, which holds most of the world's petroleum reserves.
“The situation at present seems to have stabilised into a form of low level but still often tragic exchanges between Israelis and Palestinians,” said brokers GNI.
“At this level there is no threat to global oil supplies, but it is not the current violence that troubles the market but fears of what will be needed to bring it to an end,” he added. A US-brokered truce accord agreed in Egypt one week ago has so far done little to quell the violence and Israel has declared a time-out from peacemaking with the Palestinians.
Israel's chief military spokesman said the army was bracing for a long wave of unrest, which entered a 27th day on Tuesday and has so far killed at least 128 people, almost all Palestinian. Markets are also anxious to see whether OPEC will implement its price band mechanism and add an extra 500,000 barrels per day (bpd) to world supplies.
OPEC President Ali Rodriguez reiterated Tuesday the cartel was poised to boost output by 500,000 bpd within days under its price band mechanism, but said it would have to consider any further rises beyond this “very carefully.”
A senior OPEC delegate said on Monday that top producer Saudi Arabia and other OPEC members would push for a production increase by the end of October if the price of OPEC's reference basket of crudes stayed above a target of $28 a barrel. OPEC's basket price stood at $31.17 a barrel on Monday.
But dealers are wondering what an increase on paper of half a million barrels will mean in physical output, since most in OPEC are pumping at capacity. Under an informal pact in March, the Organisation of Petroleum Exporting Countries (OPEC) agreed to boost output by that amount if its basket price stood above $28 for 20 consecutive working days.
The trigger date for the mechanism is Friday, but any official order to hike output is not likely to come before Monday because of a one-day delay in calculating the basket price at OPEC's Vienna headquarters.
The group, which controls two-thirds of world crude exports, is due to review the market at a policy-making meeting in Vienna on Nov. 12.
( Jordan Times )
© 2000 Mena Report (www.menareport.com)