|Crude futures climb as OPEC cuts back production
|Early 2005 reduction aims to stave off price decline
Cartel moves to stem quota busting by cutting output by 1 million barrels
Oil prices jumped following OPEC's decision Friday to cut production levels early next year by taking more than one million barrels a day off the market.
Brent North Sea crude closed in London at $29.90 on the International Petroleum Exchange, up 23 cents. In late afternoon trading at the New York Mercantile Exchange, light sweet crude rose 15 cents to $42.68 a barrel.
Prices were slightly down from earlier in the day, with the million barrel cut having been widely expected.
The Organization of Petroleum Exporting Countries, meeting in Cairo, still has to officially approve the decision to reduce output to target production levels. But delegates said that consent was just a formality.
If implemented, the 10 OPEC members bound by quotas would pump about one million barrels a day less than they currently are to scale back to the group's overall ceiling of 27 million barrels a day. The move is aimed at staving off further declines in the world price without triggering a new buying frenzy.
Kuwait's Sheikh Ahmed Fahad Al-Ahmed Al-Sabah said all OPEC members were committed to full compliance with the current total production ceiling of 27 million barrels a day and taking excess oil off the market.
"Some members - Iran, Kuwait and Venezuela - have been quite vocal about their desire to return to official quotas, which would effectively reduce OPEC output by one million barrels per day," said New York-based analyst George Orwel in an Energyintel research note.
In recent months OPEC had been pumping more than 30 million barrels a day with Iraq included. Iraq has been exempted from quotas to enable it to rebuild its economy.
But an international energy monitoring organization said Friday that because of violence and other problems in Iraq, its production fell sharply last month, dragging down total OPEC output. Iraq produced 1.35 million barrels a day in November, down 400,000 barrels from the previous month, the International Energy Agency said. Factoring in that downturn, OPEC pumped 29.4 million barrels daily last month, it said.
Prices have risen despite an increase in crude supplies for the third straight week, according to the weekly inventories data report released by the U.S. Energy Department on Wednesday.
Traders have shrugged off the increase due to concerns over a paltry increase in distillate supplies amid forecasts of colder weather than expected.
Distillate stocks - which include heating oil, diesel and jet fuel - are at a premium during the northern hemisphere winter season and showed a lower-than-expected increase of 1.4 million barrels to 119.3 million barrels last week.
Production had fallen by 72,000 barrels per day to 4.1 million barrels per day and supplies remain 12 percent lower than a year ago, according to the inventories report.
Heating oil for January delivery stood at $1.315 per gallon Friday on the New York Mercantile Exchange, up 1.49 cents.
"The coldest weather is expected to come in late December to early January, so there is still some concern over the heating oil level," said Victor Shum, an oil analyst at Texas-based energy consultants Purvin & Gertz in Singapore.
Crude futures are about $12 cheaper per barrel than the record of $55.17 set in October, and would have to exceed $90 per barrel to match the inflation-adjusted peak of 1980.
Petroleum prices have been high due to strong global demand, a tight supply cushion and fears of output disruptions in Iraq, Nigeria and Russia.
World crude supplies are currently about 1 percent above the global daily consumption rate of 82.4 million barrels.
The Daily Star