NEW YORK, May 18: US oil prices rose modestly on Friday despite news that Russia will lift its current crude oil export limits by the end of June.
Russia’s decision not to extend curbs on crude oil exports now in place sent oil prices retreating in early trading before an afternoon rally left prices in the black.
Crude oil for June delivery on the New York Mercantile Exchange settled 23 cents higher at $28.18 a barrel, ending a two-day price slump and giving prices a 19-cent net gain for the week.
The ever-present uncertainty over how the Israeli-Palestinian and Iraq-US conflicts will be resolved continued to provide a floor and break the fall for crude oil prices, as traders remain wary of the potential reignition of violence in the Middle East.
Russia’s Prime Minister, Mikhail Kasyanov, on Friday said the world’s second-largest oil exporter planned to bring its exports back to levels before it agreed with Organization of Petroleum Exporting Countries (Opec) nations to a coordinated supply cut.
Russia joined major non-Opec oil producers Norway and Mexico to help the Opec oil cartel lift oil prices hammered lower after the Sept. 11, attacks on the United States and by a worldwide economic slowdown.
Russia signed on to cut its crude oil exports by around 5 per cent, or 150,000 barrels per day (bpd). For its part, 10 Opec nations agreed to cut 1.5 million bpd.
Russian oil companies, reviving themselves after years of neglect under the old regime of the Soviet Union, have been pushing for the looser reins on production.
Several oil ministers from Opec member countries, including Venezuelan Minister of Energy and Mines Alvaro Silva, have indicated that Opec was not planning to raise production quotas at its June 26 ministers’ meeting in Vienna.
Oil prices surged above $29 on Tuesday — the highest since just after the Sept. 11, attacks on the United States — on the expectation that inventory reports would show US crude inventories had dropped last week.
Crude oil stocks were lower last week, according to both US government and industry reports, but gasoline and distillate, which includes heating oil and diesel fuel, inventories were higher. On Wednesday after the inventory reports were released, prices slumped as analysts said the crude stock drop was already priced in the market.
The US oil inventory data out this week indicated slumping demand for gasoline for a second week, even as the summer driving season approaches. Recent retail price boosts at US pumps may be hitting drivers’ in the pocketbook, causing a reaction to higher prices.
But this week saw several US refiners revealed plans to reduce gasoline production because high crude oil costs had shrunk profit margins.
The oil data reports showed refinery usage was already dropping, with the American Petroleum Institute showing refiners used only 92.5 per cent of capacity last week, down from 93.2 per cent the week before.—Reuters