Oil prices rallied by more than a dollar a barrel here Wednesday to within just two cents of 34 dollars a barrel amid mounting market concern that a cold winter would drain oil stocks.
Benchmark Brent North Sea crude for December delivery was selling for 33.74 dollars a barrel in afternoon trade, from 32.69 dollars at the close Tuesday.
"The general feeling is that crude demand is very strong and the cold weather is causing some panic buying," GNI analyst Lawrence Eagles said.
Data published overnight showing a fall in US distillate stocks coupled with low US crude inventories had provided "nothing particularly dramatic," he said, but had added to the market's nervousness.
"It's the sort of squeeze you can always end up with when you have stocks at very low levels," Eagles said.
The closely watched figures from the American Petroleum Institute (API) released late on Tuesday showed that US crude stocks increased by 2.52 million barrels last week, while demand for distillate stocks strengthened.
With crude inventories still very low, and forecasts of cold weather in the United States and much of Europe, dealers were concerned that inventories could dwindle further.
"If demand increases from these levels because of cold weather, you could have large stock draws," Eagles said.
The market was also concerned that the Organization of Petroleum Exporting Countries (OPEC) might cut output when it meets again in January.
OPEC now seems unlikely to increase output again after four production increases already this year.
Kuwaiti oil minister Sheikh Saud Nasser al-Sabah on Tuesday said that another increase was "out of the question," reinforcing indications from OPEC members at their Vienna meeting over the weekend that they are increasingly concerned by the prospect of a collapse in prices in the spring -- LONDON (AFP)
© 2000 Al Bawaba (www.albawaba.com)
