Crude oil fell from a 29-month high in New York as members of the Organization of Petroleum Exporting Countries discussed whether to hold a special meeting.
Crude slipped 0.4 percent after Kuwait’s oil minister said OPEC members are considering whether to convene an “urgent meeting.” Futures trimmed losses as opponents of Libyan leader Muammar Qaddafi plan to recapture a town, Bin Jawad, and after Goldman Sachs Group Inc. and Bank of America Merrill Lynch raised oil-price forecasts.
“OPEC may schedule a meeting to discuss increasing production,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “The OPEC news and signals that the U.S. may release some strategic reserves is making some investors think twice about being long.”
Crude oil for April delivery dropped 42 cents to settle at $105.02 a barrel on the New York Mercantile Exchange. The contract ended yesterday at $105.44, the highest settlement since Sept. 26, 2008. Futures are up 28 percent from a year ago.
Prices declined from the settlement after the American Petroleum Institute reported at 4:30 p.m. that U.S. crude-oil stockpiles rose 3.82 million barrels to 348.5 million. April oil fell 77 cents, or 0.7 percent, to $104.68 a barrel in electronic trading at 4:34 p.m.
Brent crude oil for April settlement slipped $1.98, or 1.7 percent, to end the session at $113.06 a barrel on the London- based ICE Futures Europe exchange.
Narrowing Spread
The premium of Brent to West Texas Intermediate, the grade traded in New York, surged to a record $19.54 on Feb. 21 as unrest spread in the Middle East and North Africa and stockpiles climbed at Cushing, Oklahoma, the WTI delivery point. The premium narrowed to $8.04 today, the least since Jan. 20.
“The spread has become so big that it’s attracted value players,” said Peter Beutel, president of Cameron Hanover Inc. in New Canaan, Connecticut, a trading-advisory company. “Widening the spread became a high-stakes poker game among a few players, and it now appears to be coming to an end.”
Kuwait’s oil minister told reporters in Kuwait City today that OPEC Secretary General Abdalla El-Badri is contacting members to see whether a meeting on production levels is needed.
“I’ve talked to Abdalla El-Badri in this regard and he is calling everybody and making a consensus on whether we’ll need an OPEC meeting, an urgent meeting,” Sheikh Ahmad al-Abdullah al-Sabah said. “We have to find out at the meeting whether there is a need for an increase or not.”
Libyan Turmoil
Violence in Libya, Africa’s third-largest crude producer, has cut output by as much as 1 million barrels a day, according to the International Energy Agency. The North African country pumped 1.39 million barrels a day in February, down from 1.59 million the previous month, according to Bloomberg estimates.
“The question now is how much geopolitical risk premium is appropriate,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “Prices have risen so much that we need an ongoing stream of frightening news to keep the market moving higher.”
Vienna-based researcher JBC Energy GmbH estimated Libya accounts for 8.8 percents of total global production of light, sweet crude, or crude oil with low density and sulfur content. This type of crude yields more of more lucrative fuels such as gasoline and diesel when processed.
Some OPEC members and producers outside the group have made up for the reduction in crude shipments from Libya, Qatari Energy Minister Mohammed Saleh al Sada said today.
‘Hardly Any Effect’
“There was hardly any effect” on supply because of the Libyan unrest, he said at a conference in Doha.
Demonstrations have toppled leaders in Tunisia and Egypt and there have been protests in countries including Iran, Yemen and Oman. In Saudi Arabia, OPEC’s biggest producer, websites have called for a nationwide “Day of Rage” on March 11 and March 20, according to Human Rights Watch.
“The big news is Libya, at least until Friday,” Beutel said. “Come Friday, all eyes will be on the Day of Rage in Saudi Arabia.”
The Obama administration will consider using the Strategic Petroleum Reserve if rising oil prices caused by turmoil in the Middle East and North Africa threaten the U.S. economy, White House Chief of Staff William Daley said on NBC’s “Meet the Press” program on March 6.
Total SA Chief Executive Officer Christophe de Margerie said there is “no reason” to tap the reserve and that to do so “is to send the message that we are scared.” He spoke at CERAWeek, a Houston conference put on by IHS Cambridge Energy Research Associates.
Goldman Sachs
Goldman Sachs raised its second-quarter outlook for Brent crude by $4.50 to $105 a barrel, citing estimates that spare capacity in OPEC has dropped below 2 million barrels a day, according to a report dated yesterday.
Bank of America Merrill Lynch increased its Brent crude price forecast for this year to $108 a barrel from $88 and for next year to $95 a barrel from $85, in a note today.
Oil volume in electronic trading on the Nymex was 861,561 contracts as of 4:31 p.m. in New York. Volume totaled 902,351 contracts yesterday, 13 percent above the average of the past three months. Open interest was 1.58 million contracts, the highest since July 16, 2007.
To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net
To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net
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