US light crude for July delivery was up 24 cents at $131.05 a barrel by 0224 GMT, having surged to $135.09 on Thursday, before traders took profit and sent the contract settling down by more than $2.00 to $130.81, the first time in five sessions that it settled lower.
London Brent crude was up 35 cents at $130.86. “Supplies not growing is still the main thing. OPEC can turn the tap but they cannot do it forever, and non-OPEC growth is not enough. But demand is important too, and it is not falling as much as expected,” said Tony Nunan, risk management executive at Tokyo-based Mitsubishi Corp.
Oil production from countries outside OPEC is stagnating and forecast to remain below 50 million barrels per day this year, at 49.56 million bpd, lower than earlier forecast, a survey of analysts showed on Thursday.
The failure by non-OPEC producers to increase output has helped drive oil prices up more than a third since the beginning of the year. It has also sent up long-term prices to even higher record prices of close to $150 a barrel, as concerns are mounting that supplies will not be enough to meet demand from developing countries in a few years’ time.
Weekly US inventories data released this week also hiked short-term concerns with crude oil stocks unexpectedly down by a large 5.4 million barrels, gasoline inventories also down by 800,000 barrels, and a lower-than-forecast 700,000-barrel rise in distillates stocks.
Secretary-General Abdullah al-Badri on Thursday repeated the group’s stance that it can do nothing to lower oil prices in a “crazy” market, blaming record prices on factors such as geopolitical tensions, speculation and the weak dollar.
The cartel’s view seemed shared by the chief executive of Royal Dutch Shell Plc, Jeroen van der Veer, who told that oil prices at a record high above $135 a barrel are rising due to market sentiment rather than a shortage of supply.
A stronger dollar on Thursday also contributed to lower oil prices as investors have increasingly been using oil as a hedge against the falling currency, setting off inverse trends in the dollar and oil.
The greenback steadied on Friday, but the currency stayed in sight of a one-month low against the euro on worries that inflation could lead to a deeper US slowdown.
Courtesy: timesofindia.indiatimes.com
