| Fear of opec cuts drive oil prices up { March 5 2004 } Original Source Link: (May no longer be active) http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1078381551868&p=1012571727088http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1078381551868&p=1012571727088
Fear of Opec cuts drives oil prices up By Kevin Morrison in London Published: March 5 2004 10:26 | Last Updated: March 5 2004 20:14 Oil prices on Friday rose to levels unseen since the run-up to the Iraq war, on fears that supplies from Opec countries may be tightening just as demand grows in the US and China, the two biggest importers.
The benchmark US crude futures contract, Nymex WTI for April delivery, peaked at $37.45 a barrel on Friday - its highest level since March 13 last year, a few days before US-led forces invaded Iraq. The April Nymex contract was trading 62 cents higher at $37.26 by the close of New York trade.
The Brent crude futures contract also reached post-Iraq war highs, touching $33.58 a barrel, before slipping to $33.35, a gain of 46 cents.
The underlying concern among traders is that Opec, the oil producers' cartel, might follow through on its promise last month to cut output from April 1. In contrast, when Opec announced output cuts last September, it still produced more than its self-imposed quotas.
In one of the strongest signals yet that Opec will stick to its plans, it was confirmed earlier this week that Nigeria and Algeria have ordered international energy companies to reduce their oil output.
Added to this is the spectre of disruptions in Venezuela, the world's fifth-largest exporter.
Oil prices have risen despite a brief rebound in the US dollar this week. Energy analysts had partly attributed the 15 per cent rise in crude futures so far this year to the slide in the dollar.
Meanwhile demand in the biggest markets is growing fast.
Wen Jiabao, Chinese premier, also gave oil markets a boost when he made a pledge to the Chinese parliament to boost energy output to resolve a power shortage that threatened its fast-growing economy.
China overtook Japan to become the second-largest oil consumer last year, as power shortages boosted oil demand by about 6 per cent. Some analysts expect demand could be as much as 10 per cent higher this year.
US retail gasoline prices this week moved close to record levels with inventories near seasonal lows ahead of the busy summer driving season.
A member of the US energy department said US gasoline demand was too strong for Opec to carry out its proposed output cuts. Guy Caruso, head of the US Energy Information Administration, said gasoline demand was stronger than expected, and did not warrant a cut in Opec production.
The Opec basket of oil prices has remained above the oil cartel's preferred $22-t o-$28 range for the past three months. The same amount of time it spent above the target range during the Iraq war.
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