Oil Trades Near 7-Week Low as OPEC, China Boost Crude Output

By Nesa Subrahmaniyan

July 28 (Bloomberg) -- Crude oil traded near a seven-week low in New York after falling as the Organization of Petroleum Exporting Countries and China raise output.

China Petrochemical Corp., the nation's second-biggest oil producer, increased its crude-oil output by 2.4 percent in the first half from a year earlier, the company said today. OPEC's supply will increase by 200,000 barrels a day in July from a month ago, PetroLogistics Ltd. said July 25.

``The supply side is quite stable right now, and there are no surprises there,'' said Tetsu Emori, fund manager at Astmax Ltd. in Tokyo. ``Most of the developments in supply and demand have made speculators bearish from bullish.''

Crude oil for September delivery traded at $123.61 a barrel, up 35 cents, in electronic trading on the New York Mercantile Exchange at 1:26 p.m. Singapore time. On July 25 the contract fell $2.23, or 1.8 percent, to $123.26, the lowest settlement price since June 4. Prices dropped 4.4 percent last week, the third weekly decline.

Speculative short positions, or bets prices will fall, outnumbered long positions by 3,640 contracts on the New York Mercantile Exchange in the week ended July 22, the Washington- based Commodity Futures Trading Commission said in its latest Commitments of Traders report. In the previous week, traders were net-long 22,382 contracts.

Oil has tumbled about $24 a barrel from the record $147.27 a barrel reached on July 11. Concern that Iran's nuclear work may had helped to push prices to an all-time high amid concerns that Israel or the U.S. might resort to military action to halt the nation's atomic drive, should diplomacy fail.

`Weaker Prices'

The 13 members of OPEC Countries will provide 32.9 million barrels daily this month, compared with 32.7 million a day in June, PetroLogistics founder Conrad Gerber said in an e-mail July 25 from Geneva. OPEC supplies more than 40 percent of the world's oil.

China is boosting domestic crude oil output while it cut imports last month. China Petrochemical, known as Sinopec Group, increased production in the first half to 20.8 million metric tons from a year ago as demand rose in the world's fastest-growing major economy.

Crude oil imports by China, the world's second-biggest energy consumer, fell to 14.57 million metric tons in June from 16.2 million tons in May, according to the Customs General Administration of China in early July.

``The news events have lately all been for weaker prices,'' said Mark Pervan, a senior commodity strategist at Australia & New Zealand Banking Group Ltd. in Melbourne. ``There's certainly some heat coming out of the market. You wouldn't discount another event coming out of Nigeria or Iran this week, so I don't think the price is going to fall that far.''

Nigerian Attacks

Gunmen in Nigeria, Africa's biggest oil producer, have freed eight foreigners during a raid on a ship in the oil-rich Niger Delta, a military spokesman said yesterday. Seven other oil workers that were abducted in separate incidents on July 25 are still being held, he said.

Attacks by Nigerian militant groups have halted more than 20 percent of the West African country's production since 2006.

Saudi Arabia, in response to calls from consuming nations, said it would produce an extra 300,000 barrels a day in June and a further 200,000 barrels a day in July to curb prices.

Brent crude oil for September settlement was at $124.71 a barrel, up 19 cents, on London's ICE Futures Europe exchange, at 1:05 p.m. Singapore time.

Crude oil may fall this week as Saudi Arabia increases output and slowing economic growth curbs consumption, a Bloomberg News survey found. Thirteen of 28 analysts surveyed, or 46 percent, said prices will fall through Aug. 1. Five of the respondents, or 18 percent, said oil will rise and 10 forecast little change.

To contact the reporter on this story: Nesa Subrahmaniyan in Singapore at nesas@bloomberg.net.