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Wednesday, November 11, 2009

Crude Resumes Advance Back Toward $80

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In a fairly volatile session on Tuesday crude oil prices finished the day relatively flat at $79/barrel after swinging from an intraday low under $78.00 to over $80.50. Several factors have been influencing the oil price in recent sessions including severe weather and reduced production in the Gulf of Mexico, a continually weak US Dollar, revised economic forecasting and historically high supply data.


Following yesterday’s volatility front month futures have been fairly stable today, rising steadily this morning to $79.40


The week’s first supply report preceded the sell-off in North America last night. The American Petroleum Institute (API) showed that crude inventories climbed 1.22 million barrels and gasoline supplies rose by 1.4 million barrels in the previous week.


This latest piece of supply data further reflects the gap between crude supply and demand. Similarly the Qatar oil minister was reported to have indicated that OPEC (Organisation of Petroleum Exporting Countries) is unlikely to alter output at its next meeting in December. In several reports Qatar oil minister Abdullah al-Attiyah said that current inventory levels were ‘very high’ and there was no shortage in the market at all.


Elsewhere other reports implied an improving demand scenario going forward. According to data released by Chinese customs authorities early this morning, China’s net oil imports were increasing and almost reached 4.5 million barrels per day (bpd) last month. The data reflects a 13% increase and it is the second-highest month on record.


Additionally the US Energy Information Administration (EIA) raised eyebrows yesterday evening as it commented on its projections for 2010. According to the EIA’s projections the gap between supply and demand is due to narrow compared with its previous guidance. EIA said that global oil production next year is forecast to rise to 85.49 million (bpd) while demand is also expected to be higher at 85.40 million bpd. Previous EIA guidance projected a surplus of 290,000 bpd.


Generally Oil & Gas stocks followed the oil price higher, Petrofac (LSE: PFC) was the leading riser in the sector, adding almost 1.5%, while Cairn Energy (LSE: CNE) and Shell (LSE: RDSB) both added 1.2%. BG Group (LSE: BG) rose marginally, while BP (LSE: BP) and Tullow Oil (LSE: TLW) lost 1%.


Midcaps also were mixed with Heritage Oil (LSE: HOIL) and Dana Petroleum (LSE: DNX) tacking on slightly more than 1% and Dragon Oil (LSE: DGO) falling 1.8%.


Energy investor Xtract Energy PLC (AIM: XTR) was among the leading risers in the junior sector with a 5% gain. Ukraine focused gas producer, Regal Petroleum (AIM: RPT) followed, advancing 4%.

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