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OPEC output cut report boosts prices in Asian trade
05 Oct, 2006 10:26:24
SINGAPORE, Oct 5, 2006 (AFP) - Oil prices rebounded in Asian trade Thursday, coming off near 8-month lows on continuing unrest in Nigeria and amid reports that OPEC members are ready to cut production in a bid to support the market, dealers said.

At 11:25 am (0325 GMT) New York's main contract, light sweet crude for November delivery, was up 77 cents at 60.18 dollars a barrel from 59.41 dollars in late US trade Wednesday. The contract at one point plunged to 57.70 dollars in US hours, a level not seen since February 16.

Brent North Sea crude climbed 63 cents to 59.85 dollars. It had sunk in London to 57.70 dollars -- an intra-day low last seen on December 30, 2005.

"I think the unrest in Nigeria has caused this rebound in oil prices and also it has reminded the market that geopolitical factors still remain," said Victor Shum, an analyst with Purvin and Gertz in Singapore.

"The market has, in the near-term, hit a bottom as we head into the (northern) winter season," Shum said.

"Also there have been talks in the last few days from different OPEC members about cuts in production, especially after the US inventory data," he added.

London's Financial Times reported Thursday that the Organization of Petroleum Exporting Countries has agreed informally that it needs to cut production by at least one million barrels a day, or least four percent, in order to boost crude prices.

"OPEC is going to defend a price floor for its oil of 50-55 dollars a barrel, the newspaper quoted one OPEC official as saying.

The 11-member grouping has maintained an official production ceiling of 28 million barrels per day since July 2005.

OPEC members Nigeria and Venezuela began Sunday to reduce their production by a combined 170,000 bpd in a move seen as an attempt to help bolster prices, which have tumbled by about 25 percent since striking record highs in July.

Prices got a boost after the Movement for the Emancipation of Niger Delta (MEND), a Nigerian armed militant group in Nigeria's oil-rich Delta region, claimed the killing of nine soldiers in a firefight Wednesday.

The group also issued evacuation warnings to oil facility operators in the region, warning operators of oil facilities in Rivers State to immediately evacuate their workers from such locations.

The militants said they are fighting for a larger share of the oil revenues and for the release of their leader who was detained since last year on treason charges.

Attacks on oil installations in the Niger Delta have cut about a quarter of production since the start of the year. Before the news from Nigeria, prices had been in freefall after news US crude oil reserves jumped 3.3 million barrels to 328.1 million barrels in the week to September 29.

Financial markets had expected crude reserves to fall 1.1 million barrels. Crude stocks are now nearly seven percent higher than at the same stage last year.

Inventories of distillates, used for heating oil and diesel fuel, increased by 200,000 barrels to 151.5 million last week, compared with forecasts of a gain of 1.5 million.

Distillates are a key market focus ahead of the northern hemisphere winter, during which demand for heating fuel peaks.

Stockpiles of gasoline, or petrol, showed an increase of 1.2 million barrels to 215.1 million, compared with expectations of a bigger rise of 1.5 million, the DoE said.

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