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Oil prices surge after opec cut { September 24 2003 } Original Source Link: (May no longer be active)
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Oil prices surge after surprise Opec cut
By Kevin Morrison in London
Published: September 24 2003 10:36 | Last Updated: September 24 2003 21:06
Oil prices surged on Wednesday as Opec producers said they would cut oil production by 900,000 barrels a day from their current daily output of 25.4m barrels.
"Opec surprised 95 per cent of the people that follow the oil price," said one London-based oil analyst. The production cuts start from November 1.
The IPE Brent contract for November delivery had gained $1.15 to $26.67 a barrel in London, reversing early losses of up to 25 cents.
The gain recaptured all of the losses over the past 10 days, which had seen a slide of more than 4.5 per cent in crude prices.
In New York, November Nymex WTI had settled $1.11 higher to $28.24 a barrel.
Analysts said that the production cut by the Organisation of Petroleum Exporting Countries at a meeting in Vienna followed the recent record imports in the US, and a notable increase in US crude inventories during the past month.
This trend continued on Wednesday, with US crude stocks up 1.5m barrels and gasoline stocks up by the same amount, which was within market expectations.
The sharp rise in oil prices also reflected short-covering by investors, who have been buying increasing volumes of short positions on Nymex crude futures, which is an indication that investors expected crude prices to fall.
The latest data from the Commodity Futures Trading Commission showed speculative investors were holding a net short position of 30,000 contracts. At the start of September they were sitting on a net long position of more than 17,000 contracts, resulting in a net change of contracts that equate to about 470,000 barrels of oil.
Analysts said that the Opec production cut may signal that the cartel is preparing the ground for a return of Iraq to the Opec fold. Iraq was a member of Opec until it was taken over by the US administration in May following the Iraq war.
The country produced 1.2m barrels in August, and this is forecast to rise to more than 1.5m by the end of December.
Opec's 10 members are estimated to have produced about 25.8m in August, and have remained above quota for most of the past four years.
Spot gold remained within striking distance of breaking seven-year highs, trading at $386.10/$386.90 a troy ounce, a rise of about $1 on the day. The London afternoon fix was $385.00.
Base metals were also stronger. Lead remained near its highest levels since May 1999, ending $2 higher at $537 a tonne at the end of open outcry trading on the London Metal Exchange.
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