Oil gains as crude supply fallsStockpiles sink far more than expected in sign that previous OPEC cut is taking effect.NEW YORK (CNNMoney.com) -- Energy stockpiles fell far more than expected last week, according to a government report Wednesday, boosting oil prices and perhaps dissuading OPEC from another production cut as its ministers gather in Nigeria. U.S. light crude for January delivery rose 35 cents to settle at $61.37 a barrel on the New York Mercantile Exchange. Oil traded up just 3 cents ahead of the government's weekly inventory report. In its report, the Energy Information Administration said crude inventories sank by 4.3 million barrels last week. Analysts were looking for a drop of 600,000 barrels, according to Reuters. Distillates, used to make heating oil and diesel fuel, fell by 500,000 barrels, while gasoline supplies slipped by 100,000 barrels. Analysts were looking for a 100,000-barrel decline in distillates supplies and a 1.2 million drop in gasoline stockpiles. The fall in crude stocks comes despite what the EIA said was a drop in refinery activity. EIA also said U.S. oil imports fell about 700,000 barrels last week. All this is evidence that an OPEC cut of 1.2 million barrels implemented in November is beginning to take effect and could convince the cartel to hold off on a further production cut when it meets Thursday in Nigeria. "The big draws today should convince OPEC not to cut," said Nauman Barakat, an energy trader at Macquarie Futures, the trading arm of Macquarie investment bank. ""They would rather enforce compliance." Several OPEC countries including Iran, Venezuela and Nigeria, which don't like high production levels that their problem-plagued infrastructure can't keep up with, have been calling for another cut. But Gulf states, especially OPEC heavyweight Saudi Arabia, have been struggling with the issue. The Saudis have said the world is oversupplied with crude, but they are also fearful that another production cut would push prices, already above $60 a barrel, too high and crimp demand. OPEC, which supplies more than a third of the world's oil, agreed to cut production by 1.2 million barrels per day effective in November, its first reduction in more than two years. But OPEC has not been able to deliver on that promised reduction, with most estimates saying the cartel has achieved somewhere between half and three-quarters of the proposed cut. An OPEC delegate told Reuters on Tuesday that the core Gulf members preferred to see the group focus on meeting the previous 1.2 million bpd reduction before making any new commitments. "No cut, compliance - this is the view up until now from the Gulf members," the delegate said as OPEC representatives began gathering in the Nigerian capital. Other analysts have said OPEC would be better off to deliver on its proposed cut before making any new promises that it can't keep. The International Energy Agency said Wednesday that the previous OPEC cut is beginning to take effect. "Already, OPEC has tightened the market quite substantially," IEA supply analyst David Fyfe told Reuters. "With prices in excess of $60, the uncertainties over winter weather and some of the risks we are flagging about non-OPEC growth, I don't think we would see a further cut as being merited at this time." Oil prices have fallen more than 25 percent from highs reached in July and have been range-bound near $60 for the past several weeks. Stocks of oil majors, including BP (Charts), ExxonMobil (Charts), ConocoPhillips (Charts), Chevron (Charts) and Royal Dutch Shell (Charts), stopped mirroring falling crude prices in mid-September and rebounded as traders bet on rising oil prices and looked for deals in a sector many saw as undervalued. But over recent weeks the traditional relationship, with oil stock prices tracking the cost of crude, has been re-established. ________________ |
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