Crude Oil Price Declines for a Third Day on Speculation OPEC Will Increase Quotas

Oil dropped for a third day in New York amid speculation OPEC may increase output quotas when it meets in Vienna tomorrow.

Futures slipped as much as 0.7 percent today after falling to the lowest in two weeks yesterday. The Organization of Petroleum Exporting Countries may raise production limits, Barclays Plc said June 6. The International Energy Agency said on May 19 it saw “an urgent need” for more oil to help bring down high prices threatening economies. Crude also slid on signs fuel demand is faltering along with slowing economic growth.

“The outcome of the OPEC meeting will be key,” said Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne, who predicted oil will average $113 a barrel in the third quarter. “The growth outlook from the economic data looks like it’s hit a bit of a softer patch.”

Crude for July delivery slid as much as 68 cents to $98.33 a barrel in electronic trading on the New York Mercantile Exchange and was at $98.52 at 12:16 p.m. Singapore time. The contract yesterday fell $1.21, or 1.2 percent, to $99.01. Prices are up 38 percent the past year.

Brent crude for July delivery was at $114.01 a barrel, down 47 cents, on the London-based ICE Futures Europe exchange. The contract yesterday lost $1.36, or 1.2 percent, to $114.48. Prices are 58 percent higher the past year.
Oil Bets

The European benchmark contract traded at a premium of $15.49 a barrel to U.S. futures today. The difference between front-month contracts in London and New York reached a record $19.54 on Feb. 21. It averaged 76 cents last year.

Options traders increased bets that oil prices will fall further. The most-active option yesterday was the July $95 put, which rose 17 cents to 79 cents. The second-most active contract was the August $90 put, which climbed 13 cents to $1.05.

“There is speculation that OPEC may raise production targets this week, on concerns from some OPEC members that higher oil prices are curbing demand,” economists at Australia & New Zealand Banking Group Ltd., led by Warren Hogan, wrote in a note today.

A “recalibration” of OPEC’s output target closer to actual output is expected, Barclays analysts led by London-based Paul Horsnell said in yesterday’s report.
OPEC Targets

The group will have to increase its production target by as much as 2.5 million barrels a day from 24.845 million or risk prices rising higher, according to a report from Johannes Benigni, chairman of consultant JBC Energy GmbH in Vienna.

“If OPEC doesn’t increase supply sufficiently it would be a tacit communication to the market that $100+ oil is acceptable,” said Benigni.

OPEC won’t announce a supply increase and will keep its formal production quota unchanged for an eighth consecutive meeting at the June 8 gathering, according to a Bloomberg survey of analysts conducted May 24-31. Venezuelan Oil Minister Rafael Ramirez also said the group is unlikely to raise production.

The OPEC members bound by the output quotas, not including Iraq, produced 26.2 million barrels a day in May, or about 1.4 million barrels over the limit, according to a Bloomberg News survey of analyst, producers and oil companies. Total supply was 28.895 million last month.

Brent has advanced 21 percent this year as unrest in the Middle East and North Africa toppled leaders in Tunisia and Egypt and spread to Libya. In Syria, state television reported yesterday that more than 120 members of the security forces have been killed in the northern town of Jisr al-Shughour.

U.S. Stockpiles

A report from the U.S. Energy Department tomorrow may show U.S. gasoline stockpiles climbed by 1 million barrels last week from 212.3 million, according to a Bloomberg News survey of analysts. Crude inventories probably dropped 1.5 million barrels, the survey shows.

The U.S. unemployment rate unexpectedly climbed to 9.1 percent in May and payrolls grew at the slowest pace in eight months, the Labor Department reported June 3. Employers added 54,000 jobs last month, after a revised 232,000 gain in April that was smaller than initially estimated. The median forecast in a Bloomberg News survey called for payrolls to rise 165,000.

The Energy Department is scheduled to release its Short- term Energy Outlook today. The department last month cut its forecast for global oil consumption for this year to 88.08 million barrels a day from 88.2 million estimated in April.

Source. Oil dropped for a third day in New York amid speculation OPEC may increase output quotas when it meets in Vienna tomorrow.

Futures slipped as much as 0.7 percent today after falling to the lowest in two weeks yesterday. The Organization of Petroleum Exporting Countries may raise production limits, Barclays Plc said June 6. The International Energy Agency said on May 19 it saw “an urgent need” for more oil to help bring down high prices threatening economies. Crude also slid on signs fuel demand is faltering along with slowing economic growth.

“The outcome of the OPEC meeting will be key,” said Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne, who predicted oil will average $113 a barrel in the third quarter. “The growth outlook from the economic data looks like it’s hit a bit of a softer patch.”

Crude for July delivery slid as much as 68 cents to $98.33 a barrel in electronic trading on the New York Mercantile Exchange and was at $98.52 at 12:16 p.m. Singapore time. The contract yesterday fell $1.21, or 1.2 percent, to $99.01. Prices are up 38 percent the past year.

Brent crude for July delivery was at $114.01 a barrel, down 47 cents, on the London-based ICE Futures Europe exchange. The contract yesterday lost $1.36, or 1.2 percent, to $114.48. Prices are 58 percent higher the past year.
Oil Bets

The European benchmark contract traded at a premium of $15.49 a barrel to U.S. futures today. The difference between front-month contracts in London and New York reached a record $19.54 on Feb. 21. It averaged 76 cents last year.

Options traders increased bets that oil prices will fall further. The most-active option yesterday was the July $95 put, which rose 17 cents to 79 cents. The second-most active contract was the August $90 put, which climbed 13 cents to $1.05.

“There is speculation that OPEC may raise production targets this week, on concerns from some OPEC members that higher oil prices are curbing demand,” economists at Australia & New Zealand Banking Group Ltd., led by Warren Hogan, wrote in a note today.

A “recalibration” of OPEC’s output target closer to actual output is expected, Barclays analysts led by London-based Paul Horsnell said in yesterday’s report.
OPEC Targets

The group will have to increase its production target by as much as 2.5 million barrels a day from 24.845 million or risk prices rising higher, according to a report from Johannes Benigni, chairman of consultant JBC Energy GmbH in Vienna.

“If OPEC doesn’t increase supply sufficiently it would be a tacit communication to the market that $100+ oil is acceptable,” said Benigni.

OPEC won’t announce a supply increase and will keep its formal production quota unchanged for an eighth consecutive meeting at the June 8 gathering, according to a Bloomberg survey of analysts conducted May 24-31. Venezuelan Oil Minister Rafael Ramirez also said the group is unlikely to raise production.

The OPEC members bound by the output quotas, not including Iraq, produced 26.2 million barrels a day in May, or about 1.4 million barrels over the limit, according to a Bloomberg News survey of analyst, producers and oil companies. Total supply was 28.895 million last month.

Brent has advanced 21 percent this year as unrest in the Middle East and North Africa toppled leaders in Tunisia and Egypt and spread to Libya. In Syria, state television reported yesterday that more than 120 members of the security forces have been killed in the northern town of Jisr al-Shughour.

U.S. Stockpiles

A report from the U.S. Energy Department tomorrow may show U.S. gasoline stockpiles climbed by 1 million barrels last week from 212.3 million, according to a Bloomberg News survey of analysts. Crude inventories probably dropped 1.5 million barrels, the survey shows.

The U.S. unemployment rate unexpectedly climbed to 9.1 percent in May and payrolls grew at the slowest pace in eight months, the Labor Department reported June 3. Employers added 54,000 jobs last month, after a revised 232,000 gain in April that was smaller than initially estimated. The median forecast in a Bloomberg News survey called for payrolls to rise 165,000.

The Energy Department is scheduled to release its Short- term Energy Outlook today. The department last month cut its forecast for global oil consumption for this year to 88.08 million barrels a day from 88.2 million estimated in April.

Source.

Latest Oil Prices Dip

Brent crude slipped toward $115 a barrel on Monday on concern about demand after disappointing jobs data from top consumer United States, but a softer dollar and political upheaval in the Middle East limited losses.

The possibility that OPEC will raise supply when ministers meet this week also put pressure on prices. Gulf Arab members led by Saudi Arabia will push for a rise, but were likely to face opposition from OPEC's leading hawks Iran and Venezuela.

"Today there is no shortage of supply. OPEC will do its job," the chief executive of the French energy giant Total (TOTF.PA) said at a conference in Kuala Lumpur.

Brent crude fell 33 cents to $115.51 a barrel by 0340 GMT, after settling up 30 cents on Friday. U.S. crude slipped 8 cents to $100.13 a barrel.

"We are going to have sideways trade, basically because the weaker economy means weaker crude oil prices because of less demand in the U.S., but we have Yemen that's going to keep it high (along with) the weaker dollar," Tony Nunan, a risk manager with Tokyo-based Mitsubishi Corp, said.

U.S. data showed payrolls rose by 54,000 in May, the softest reading since September, and the country's jobless rate rose to 9.1 percent in May from 9 percent in April.

Falling oil demand and higher supplies in the world's largest economy are pushing prices lower, analysts said. U.S. crude oil stocks rose in the week to May 27 to their highest seasonal level for May since 1990.

TransCanada Corp's (TRP.TO) 591,000 barrel-per-day (bpd) capacity Keystone pipeline -- which carries oil from Alberta to the U.S. oil hub of Cushing -- resumed shipping crude oil, one week after being shut by a leak at a Kansas pumping station, the Calgary-based company said in a statement.

Technical charts indicated that oil prices may drop in the short term, with Brent expected to slip to $112 per barrel and U.S. oil expected to revisit the Friday low of $98.12 per barrel.

The dollar .DXY slid to a fresh one-month low against a basket of major currencies early in Asia on Monday, as the jobs data bolstered expectations that U.S. interest rates will stay low for longer.

"The value of the dollar and the way it's declining is keeping some of these commodities at levels which are not sustainable," Jonathan Barratt, managing director of Commodity Broking Services in Sydney, said.

MIDDLE EAST SUPPORTS

Violence in the Middle East underpinned prices due to worries that instability could spill over to some of the world's largest oil and gas producers and disrupt global supplies.

Yemeni President Ali Abdullah Saleh was recovering from an operation in Saudi Arabia to remove shrapnel from his chest while a truce between his troops and a tribal federation appeared to be holding.

Protesters, interpreting Saleh's absence as a sign that his grip on power was weakening, celebrated on the streets of Sanaa where they have been staging anti-government demonstrations since January.

Syrian forces shot dead 31 people in the last 48 hours during demonstrations in a northwestern town and official media said gunmen killed four policemen in the same town.

Protests against Syria's President Bashar al-Assad have grown despite reform gestures dismissed by the opposition and a continuing crackdown that has killed at least 1,100 people since the uprising erupted two months ago.

Source.

Oil edges up after falling below $US100

OIL edged up today, rebounding from earlier lows and holding close to the key level of $US100 a barrel as traders await more signals on the strength of the US economy.

Light, sweet crude oil for July delivery settled US11 cents higher at $US100.40 a barrel on the New York Mercantile Exchange, after dropping as low as $US98.46 a barrel earlier in the session. Brent crude oil on the ICE futures exchange ended $US1.04 higher at $US115.57 a barrel.

After a 2.4 per cent drop yesterday, oil prices fluctuated between gains and losses for much of the latest session. A US government report showing increases in oil and petrol stockpiles initially pushed crude oil lower, but prices quickly returned to the middle of a trading range between $US95 and $US105 that has held oil since mid May.

"We still have that gravitational pull toward the $US100 level. Whenever we move a couple bucks from that level, we seem to swing back again," said Jim Ritterbusch, head of oil-trading adviser Ritterbusch and Associates.

US oil stockpiles rose by 2.9 million barrels in the week ended May 27, according to data released by the Department of Energy. Analysts had expected stocks would fall, according to a Dow Jones Newswires survey. Gasoline stocks also rose, adding 2.6 million barrels in the fourth-straight week of increases.

Rising inventories have combined with a string of weak economic reports in recent days to keep pressure on crude oil prices. Yesterday, an index on manufacturing fell short of expectations, while a separate report said the private sector hired 38,000 workers last month, well short of the 190,000 expected by economists.

Early in the latest session, jobless claims saw only a modest decline, suggesting the important monthly jobs report, to be released late tonight (AEST), may be gloomier than analysts had thought.

Many investors have become more pessimistic on the state of the economy over the past month, which has factored into the drop in oil prices from above $US113 a barrel in early May. Concerns are growing that a slowdown in China along with issues related to euro-zone debt will weigh on the global recovery.

Earlier this week, economists from Bank of America-Merrill Lynch lowered their estimates for growth in 2011 US gross domestic product to 2 per cent from 2.8 per cent.

The threat of a slowdown already appears to be contributing to a drop in oil and fuel consumption, as businesses and consumers cut spending in the face of high prices.

US petrol stockpiles have increased for four straight weeks, the Energy Department data showed. In addition, US petrol demand for the Friday before Memorial Day, an important day of travel, fell by 3.7 per cent from a year ago, according to a MasterCard SpendingPulse report released on Tuesday.

"The fact that crude (oil) is still building, still finding its way into storage, it could be that we're seeing a little bit of a slowdown in demand," said Tom Bentz, a director at BNP Paribas Commodity Futures.

"In general, the market is vulnerable because of the weak economic data we've been seeing."

Source.

Oil slides 2.4pc on US demand concerns

Light, sweet crude for July delivery settled down $US2.41, or 2.4 per cent, to $US100.29 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange, which has traded above $US100 a barrel since February, settled down $US2.20, or 1.9 per cent, to $US114.53 a barrel.

Crude ended lower after the ISM manufacturing index fell short of expectations, indicating growth in the energy-intensive manufacturing sector has not been as fast as economists expected. The index fell to 53.5 in May, compared with a forecast for 57. Readings above 50 indicate growth.

April's reading came in at 60.4.

"The manufacturing sector had been a big engine for growth," said Andy Lebow, senior vice-president for energy at MF Global. "It's very significant on the diesel (demand) side."

A separate report said the US private sector hired 38,000 new workers last month, well below the 190,000 expected by economists. The report, by payroll giant Automatic Data Processing and consultancy Macroeconomic Advisers, is also prompting worries about oil demand in the world's largest crude consumer.

"Soft data is what caused all this to happen, started the slide," said Mark Waggoner, president of Excel Futures.

The disappointing jobs reading comes ahead of the most closely watched report on US employment levels, the non-farm payrolls report, due on Friday.

Several reports have suggested the US economy struggled in May. Regional factory reports were weak, jobless claims remained high, and the Conference Board's consumer confidence index fell sharply last month.

Today's decline wiped out yesterday's gains. Oil futures rose more than 2 per cent yesterday on reports that European countries appeared closer to another bailout of Greece, as well as on the outage of TransCanada's Keystone pipeline network.

The pipeline network connects heavy oil fields in Alberta with the Nymex delivery point of Cushing, Oklahoma. Less oil flowing into Cushing is seen as easing the supply glut at the oil hub and supporting the Nymex contract.

The pipeline remained down for repairs today, spokesman Terry Cunha said.

Source.