MW: Crude gains as further OPEC cuts deemed possible
Energy traders await petroleum data expected to show buildup in crude
Crude-oil futures got an early boost Wednesday from indications that the OPEC might cut production further at the cartel's March meeting, as investors awaited data expected to show higher U.S. crude inventories.
Crude for March delivery added 81 cents to $41.58 a barrel in recent action on the New York Mercantile Exchange.
"Oil prices are slightly higher on speculation that OPEC will cut production further," said analysts at Action Economics.
The Organization of the Petroleum Exporting Countries agreed in December to cut member nations' production quotas by 4.2 million barrels a day from September levels.
Chakib Khelil, Algeria's energy minister, said Tuesday that there was a 50% chance of another supply cut during OPEC's next meeting on March 15, according to media reports.
Supply data ahead
Meanwhile, the Energy Information Administration will release data on oil inventories at 10:30 a.m. Eastern.
Analysts expect an increase of 2.9 million barrels in U.S. commercial crude-oil stockpiles in the week ended Jan. 30, a survey by energy information provider Platts showed.
They also project gasoline inventories to have risen 1.3 million barrels on the week, with distillate stocks pegged to have declined by 1.2 million barrels because of strong demand for winter fuels amid cold weather gripping much of the U.S.
Late Tuesday, the American Petroleum Institute reported that crude inventories rose by 8.13 million barrels during the week ended Jan. 30, to stand at a total of 346.2 million barrels.
Motor gasoline supplies increased by 2.15 million barrels, while distillate stocks declined by 184,000 barrels, said API, a trade association for the U.S. oil and natural-gas industries.
"The markets seem to have taken the rather bearish API figures ... somewhat in stride," said Edward Meir, an analyst at MF Global.
"More generally, we suspect that most markets will continue a largely sideways drift, with a slight upward bias, while waiting for key policy initiatives coming out of Washington to take form," Meir said in a research note.
Morgan Stanley sees $35 average for oil
Also factoring into traders' thinking, analysts at Morgan Stanley expect oil prices to average $35 a barrel in 2009 and fall to a low of $25 a barrel in the second quarter, "as global demand is posed to post its largest year-on-year contraction since 1982 on a sputtering global economy."
"The magnitude of weakness plaguing emerging-market economies -- champions of oil demand growth since 2000 -- together with continued weakness in OECD economies supports our belief that oil demand will fall by 1.5 million barrels a day in 2009," the analysts said in a research report dated Feb. 2.
The Organization for Economic Co-operation and Development is made up of 30 developed countries, including Germany, France and the United States.
"Supply constraints will remain a longer-term issue and will be intensified by the current bout of weaker prices," the Morgan Stanley analysts said. "However, in our view, the magnitude of demand weakness will leave this constraint a non-issue in 2009."
In other news, the United Steelworkers union on Tuesday said it reached a tentative agreement with a unit of Royal Dutch Shell , a move that averts a possible strike at facilities that handle the bulk of crude-oil refining capacity in the U.S. Read more.
The union said the new contract would become the minimum standard of wages, benefits and working conditions for all 30,000 refinery workers in the U.S. who belong to the union.
Also in energy trading Wednesday, March reformulated gasoline was flat at $1.17 a gallon and March heating oil rose 1 cent to $1.34 a gallon.
March natural-gas futures rose 6 cents to $4.57 per million British thermal units, a 1.4% advance.
The EIA will release data on U.S. natural gas in storage on Thursday. IHS Global Insight is projecting a drawdown of 221 billion cubic feet for the week ended Jan. 30.
