Crude Oil Rises After OPEC Cut Output in January to Avoid Glut

Feb. 3 (Bloomberg) -- Crude oil rose on speculation that reduced OPEC production in January will curb global inventories and bolster prices.

OPEC output averaged 28.57 million barrels a day last month, down 3.5 percent from December, according to a Bloomberg News survey of oil companies, producers and analysts. The United Arab Emirates and Qatar plan to extend reductions in crude-oil shipments in March, according to refiners.

“It looks like OPEC made substantial cuts,” said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. “They still have a long way to go, but it appears the market is inclined to give OPEC the benefit of the doubt.”

Crude oil for March delivery rose 70 cents, or 1.8 percent, to settle at $40.78 a barrel at 2:54 p.m. on the New York Mercantile Exchange. Prices are down 8.6 percent this year and 54 percent from a year ago.

The Organization of Petroleum Exporting Countries, responsible for more than 40 percent of global oil supply, agreed on Dec. 17 in Oran, Algeria, to lower production as oil prices headed for their first annual decline since 2001.

OPEC members with output quotas, all except Iraq, pumped 26.2 million barrels a day, 1.36 million more than their target of 24.85 million barrels a day, according to data compiled by Bloomberg.

Saudi Arabia, OPEC’s biggest producer and the world’s top oil exporter, cut output by 375,000 barrels a day last month to an average 8.025 million barrels a day, the lowest since December 2002. Production was 26,000 barrels a day lower than its target of 8.051 million barrels a day, the Bloomberg survey showed.

U.A.E. and Qatar

The U.A.E. and Qatar plan to reduce their crude oil shipments to Asia in March in line with OPEC cuts, said refiners who received notices from suppliers.

State-owned Qatar Petroleum will slash supplies of its Marine grade sold under long-term contracts by 15 percent, following a 6 percent cut in February, said the refinery officials in Singapore, China, Japan and South Korea, who asked not to be named, citing confidentiality agreements.

Abu Dhabi National Oil Co., the Emirates’ state-owned producer, will cut supplies of Murban oil by 10 percent after a 15 percent reduction in February, said the officials. Shipments of Upper Zakum grade will be reduced by 15 percent, Umm Shaif by 10 percent and Lower Zakum by 10 percent, similar to cuts in volume last month.

‘Stabilized’ Prices

OPEC production reductions have “stabilized” crude prices, halting a six-month decline, Algerian Oil Minister and former OPEC President Chakib Khelil told Radioprogramas, a Lima-based radio station today. Crude-oil prices will rebound in the third quarter because of rising demand, he said.

“OPEC may need to take a little more off the market than has already been agreed to,” said Adam Sieminski, the chief energy economist at Deutsche Bank AG in Washington. “It all depends on how the demand numbers shape up.”

OPEC may take “new measures” if present production cuts don’t result in an increase in oil prices, Portuguese news agency Lusa reported, citing OPEC President and Angolan Oil Minister Jose Maria Botelho de Vasconcelos. For Angola, an oil price of $75 a barrel “would already be very good,” Botelho de Vasconcelos said today, according to Lusa.

The 12-member group’s next ministerial meeting is on March 15 in Vienna.

“The Saudis are probably happy to wait until March,” Sieminski said. “They can hold the other members’ feet to the fire. They will want to see better compliance from the more- aggressive members like Iran and Venezuela.”

U.S. Inventories

U.S. crude-oil stockpiles increased 3 million barrels last week, according to the median of 13 analyst estimates in a Bloomberg News survey. The Energy Department is scheduled to release its weekly petroleum supply report tomorrow at 10:30 a.m. in Washington.

The industry-funded American Petroleum Institute reported that U.S. supplies rose 8.13 million barrels to 346.2 million last week. The API published its weekly report on oil inventories at 4:30 p.m. in Washington today.

The API moved release of its inventory data to Tuesday afternoons beginning last week. It had been issuing its reports on Wednesday mornings since 2003 to coincide with supply totals released by the government.

The price of oil for delivery next January is 31 percent more than for the current month, increasing the opportunity for traders to profit from storing crude for later use. This structure, in which a future month’s price is higher than the one before it, is known as contango.

Trading Volume

Volume in electronic trading on the exchange was 392,505 contracts as of 3:02 p.m. in New York. Volume totaled 498,610 contracts yesterday, up 1.8 percent from the average over the past three months. Open interest yesterday was 1.26 million contracts. The exchange has a one-business-day delay in reporting open interest and full volume data.

Falling prices and lower fuel demand have hurt energy company earnings. BP Plc, Europe’s second-biggest oil company, posted its first quarterly loss in seven years today. The fourth- quarter loss was $3.3 billion, or 18 cents a share, compared with net income of $4.4 billion, or 23 cents, a year earlier, London- based BP said today in a statement.

Brent crude oil for March settlement increased 26 cents, or 0.6 percent, to end the session at $44.08 a barrel on London’s ICE Futures Europe exchange.