February 22, 2005
Yahoo News
LONDON (Reuters) - Oil prices climbed above $49 a barrel on Tuesday, bolstered by a late bout of cold winter weather in Europe and the United States and a sharp decline in the dollar versus other currencies.
U.S. crude oil (CLc1) jumped by $1.27 a barrel to a three week high of $49.62, but later eased to $49.22 a barrel after OPEC members Kuwait and Libya said they saw no need for a production cut at the cartel's March meeting in Iran.
"At the meeting there should be consultations, but as Kuwait, if the situation remains as it is now there is no need to cut production," Kuwait's oil minister Sheikh Ahmad al-Fahd al-Sabah, who is also president of OPEC, told reporters.
"I agree that we don't need to cut (supply) if the prices are as much as this... I don't think we need to cut unless the prices are falling below $35 per barrel, then there is a need for a cut," Libya's oil minister Fathi Bin Shatwan told Reuters.
NYMEX April futures (CLJ5) jumped above $50 a barrel intraday but then also eased to $49.86 a barrel. Prices are up sharply from last year's average $41.48 a barrel, but off the contract's peak of $55.67 in October.
Brent crude traded in London (LCOc1) gained 60 cents to $47.33 a barrel after rising 39 cents on Monday, when the U.S. market was shut for a holiday.
"It's because of the cold weather and (because) Brent closed up yesterday," said John Brady at ABN AMRO in New York.
Cold weather on both sides of the Atlantic has helped stir late-winter demand for heating oil, giving fresh uplift to prices since U.S. inventories of the fuel are still quite low.
Europe is much colder than normal this week while the U.S. Northeast is just emerging from an unseasonably chilly weekend.
WEAK DOLLAR
"The dollar moved sharply overnight and oil is following it. If the dollar continues to weaken oil will be obviously higher," said Chris Furness, senior market strategist at 4Cast.
"We do see the dollar continuing to weaken. So oil could be back to above $50 (a barrel) within a couple of weeks even without any major moves," he added.
Weather conditions in both Europe and the United States are expected to moderate soon, which would prompt the market to refocus on stockpiles of U.S. crude and gasoline, currently running 7-9 percent above last year's levels.
The Organization of the Petroleum Exporting Countries is keeping a close watch on global stockpiles to ensure that an overly large build does not send prices spiraling lower when demand eases after the northern winter.
Sheikh Ahmad said he saw no signs that oil stockpiles were rising above 52 days of forward demand cover -- well below the 56 days that OPEC producers have said is excessive.
Saudi Oil Minister Ali al-Naimi also said on Monday that he did not expect inventories to rise above 52 days of demand cover in the second quarter, when consumption eases.
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