Oil holds steady despite inventory reportCrude closes below $59 as refinery activity ramps up; doubts remain over OPEC's ability to cut output.NEW YORK (CNNMoney.com) -- Oil prices held steady Wednesday as traders shrugged off a report showing declining fuel stocks and instead focused on more refinery activity and lingering questions over OPEC's ability to cut production. Crude settled 2 cents lower at $58.71 a barrel after zigzagging between $57.80 and $59.45 a barrel in trading on the New York Mercantile Exchange. Earlier, oil had traded down 41 cents prior to the report's release, but it traded higher just after. In its weekly inventory report, the Energy Information Administration said crude stocks rose by 2 million barrels last week. Analysts were looking for a gain of 2.7 million barrels, according to Reuters. Distillates, used to make heating oil and diesel fuel, fell by 2.7 million barrels, while gasoline supplies dropped by 2.8 million barrels. Analysts were looking for a 1.3 million-barrel drop in distillates supplies and a 1.3 million-barrel decline in gasoline stockpiles as well. While the inventory report was bearish for prices, EIA also said refineries operated at 88.9 percent capacity, 2 percent more than analysts had expected. But OPEC's talk of a 1.2 million-barrel production cut - which has only been partially met - continued to play on investors' minds. "People are skeptical about OPEC's ability to cut production in a meaningful way," said Mike Fitzpatrick, an energy analyst at Fimat. Fitzpatrick said he expects oil to trade in a narrow band between $56 and $61 as traders wait for winter demand to pick up or more definitive information out of OPEC. But, noting ongoing tensions with Iran and other geopolitical concerns, he said that range could be broken without warning. "These things can move to center stage at any time," he said. Oil prices have tumbled about 25 percent since mid July on swelling stockpiles, a cooling of tensions in the Middle East, a hurricane season that never materialized and concerns over a slowing economy. Yet, stocks of oil majors including BP (Charts), ExxonMobil (Charts), ConocoPhillips (Charts), Chevron (Charts) and Royal Dutch Shell (Charts) have risen since mid-September, helped most recently by generally solid earnings reported last week. After a steep sell-off in August and September, oil prices stabilized in October, bouncing around the $60 mark, still three times more expensive than at the beginning of 2002. The OPEC question Keeping prices from falling further have been production cuts from some OPEC members and geopolitical fears that have had more acute effects as a result of tight supply and demand in the crude market. Oil prices slid nearly 4 percent Monday as traders bet OPEC will have little luck in getting all its members to agree to a substantial production cut. OPEC started talking of a production cut of around 1.2 million barrels several weeks ago, but so far only Saudi Arabia and the United Arab Emirates have agreed to a meaningful reduction. The announcement has to this point had only a marginal impact on prices. Some analysts have said the cut is too little, too late. And with crude prices still relatively high, experts have also said some countries will only pay lip service to the cut, while others like Libya and Algeria are likely to flout it altogether. Yet, traders still believe OPEC has some bite. "It's unlikely that we'll see full implementation, but that's not important because the Saudis have committed to their reduction," Bansei Securities analyst Makoto Takeda told Reuters. "There is a likelihood of a further cut in December, so traders are nervous about selling further." Worldwide demand is also being watched. Reuters reported Wednesday that China will add up to 4 million barrels of crude to its strategic reserves by mid-December, more than doubling stocks. ________________ |
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