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Oil prices stay firm above 51 dollars Original Source Link: (May no longer be active)
http://www.reuters.com/financeNewsArticle.jhtml?type=businessNews&storyID=7708325http://www.reuters.com/financeNewsArticle.jhtml?type=businessNews&storyID=7708325
Oil Prices Stay Firm Above $51
Wed Feb 23, 2005 01:42 AM ET
By Mia Shanley
SINGAPORE (Reuters) - Oil prices held above $51 a barrel on Wednesday, after a rally of almost 6 percent on support from frigid weather in the north and sharp declines in the U.S. dollar.
Prices struck a 16-week high on Tuesday as colder temperatures in Europe and the United States drove late-winter demand for heating fuel while analysts predicted another drawdown in U.S. distillate stocks.
U.S. crude oil prices for April shed 4 cents at $51.38 a barrel by 1:34 a.m. EST. The March contract, which expired on Tuesday, had surged $2.80 to settle at $51.15 in New York, breaking out of the $45 to $50 trading range for the first time since early January.
Oil prices have risen more than $5 in the last two weeks and are within striking distance of the record $55.67 a barrel hit last autumn, dealers said.
"Even though people say supplies are OK there is concern that there is not enough spare capacity in the market. The margin for error is much smaller than it's ever been," said John Brady at ABN AMRO in New York.
Demand for heating fuel in the U.S. Northeast, the world's biggest heating oil market, was forecast to be 5.9 percent above normal in the week to Feb. 26, the U.S. National Weather Service said.
A falling U.S. dollar, which suffered its biggest daily decline in two months against major currencies on Tuesday, also sparked fund buying and drove oil prices higher.
"Overall, we are looking at a commodity bull-run here that has a lot of potential. People are looking for a place to put their money," Brady said.
But the dollar recouped some losses against the euro and the yen on Wednesday after Seoul said plans to diversify its foreign exchange reserves did not mean it would sell the U.S. currency.
EYES ON SUPPLY
Efforts by OPEC members Kuwait and Libya to reassure the market that the current price strength meant there was no need for the cartel to reduce output failed to cool down prices.
"At the meeting there should be consultations, but... if the situation remains as it is now there is no need to cut production," Kuwait's oil minister and OPEC president Sheikh Ahmad al-Fahd al-Sabah told reporters.
Lower supply forecasts from non-OPEC producers -- especially Russia -- have signaled a heightened need for OPEC's oil, while stronger demand is expected to tighten overall supply this year.
OPEC is keeping a close watch on global stockpiles to ensure that an overly large build does not send prices sliding when demand eases after the northern winter.
U.S. crude oil supplies are expected to rise 500,000 barrels for the week to Feb. 18 this week, a preliminary Reuters survey of eight analysts found, which would be a rise for the second-straight week.
But the analysts also expected a 1.7 million-barrel drop in distillate stocks.
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