Oil Prices Rise as Exporters Consider Output Cuts

The prices of petroleum rebounded after they had plunged to their lowest point this year due to the OPEC proposal to reduce its production. But the rise was further supported by a US government report regarding the decline of heating fuel inventories and the decision of Norway to shut its operations at 2 offshore oil blocks thus disrupting supplies from the third biggest oil producer and exporter in the world. Crude oil, then, settled at $58.19 per barrel in the US after it had previously dropped to $57.22, which was its lowest point since December 2005. Although the Organization of Petroleum Exporting Countries decided earlier to maintain their 28 million barrel daily quota, the group of exporters is now considering to lower its production. In fact, the OPEC members have proposed to cut daily supplies by one million barrels. The group of exporters though is yet to decide over the matter. Meanwhile, Norwegian safety officials ordered last Thursday a shutdown in the operations at 2 offshore oil blocks. But according to reports, state-owned Statoil ASA and the Norwegian unit of Royal Dutch Shell, both of which share the operations in the two sites, were likely to continue with their production until they meet and negotiate with concerned authorities. A representative of Norway's Petroleum Safety Authority said that the agency had already sent letters to the two operators informing them that it did not approve the lifeboat standards at Norske Shell ASA's 140,000 barrel a day Draugen field and Statoil's 110,000 barrel a day Snorre A platform. According to Inger Anda, the shutdown order would result to a 9% fall in Norway's daily oil output, which is around 2.7 million barrels of light oil, crude oil, and natural gas liquids. The disruption of Norway's production would then affect global supplies considering its position as one of the biggest petroleum producers and exporters in the world. Meanwhile, the US Energy Information Administration stated last Thursday that domestic stocks of distillates that include diesel and heating fuel dropped by 1.6 million barrels thus settling to 149.9 million barrels. According to the EIA, the decrease was due to the decline of operations in fuel refineries. Heating fuel accounted for the larger percentage of the fall in distillate inventories considering that heating oil plunged to its lowest level since March 24. The current distillate inventories though are still above the average level for this season of the year. Meanwhile, crude oil inventories increased by 2.4 million barrels thus settling to 330.5 million, while gasoline stocks rose by 300,000 barrels to 215.4 million barrels. It must be noted that the cost of petroleum is hovering around its lowest point this year amidst reports that major exporters might soon cut their production. Recently, exporters have proposed a one million cut in the OPEC output. Particularly, Iran and Algeria have openly expressed their support to the proposal. Meanwhile, Saudi Arabia, which is the biggest oil producer worldwide, is yet to issue its final decision concerning the issue. Its move would be crucial in determining the future of oil prices in the global market. Since the middle of July, the cost of petroleum has decreased by more than 20% thus rousing serious concerns among the world's biggest exporters. Source : http://www.tbc-world.com