Cold weather revives prices

28 November 2004
Oil prices rose as November drew to a close, largely on fears of an impending chill on both sides of the Atlantic and a lack of heating oil to stave off its effects. National positions also began solidifying ahead of the forthcoming OPEC meeting, with the traditional hawks showing their cards early. Spot Brent was trading at $42.43 a barrel on 24 November, compared with $40.90 a barrel a week earlier.

A cold snap in Europe sparked the price rise, by raising the prospect of Europeans sucking up precious supplies of distillates which might otherwise feed American heaters. US data released on 24 November showed both crude and distillate supplies to be relatively flat, but the latter are well down on the seasonal norm. Forecasters foresee freezing temperatures hitting North America in early December.

On the supply side, there was little to report over the course of the week aside from uncharacteristically poor weather in Iraq disrupting some crude shipments. In Russia, the government confirmed that it was to auction Yuganskneftgaz, the key producing company in the stable of oil giant Yukos, to pay massive tax arrears. Foreign oil firms are thought unlikely to bid due to the potential legal and financial pitfalls; state-owned Gazprom is the favourite.

As the 10 December OPEC meeting looms, Caracas and Tehran have made clear they would like to see output trimmed, although whether they will press for a formal quota cut or merely stricter adherence to existing ceilings is unclear. Cambridge Energy Research Associatessaid in a report released on 23 November that supply was set to outstrip demand by an average of 400,000 barrels a day (b/d) over the fourth quarter. OPEC itself added a bearish note in its latest monthly report, reducing its 2005 demand forecast by 120,000 b/d to 1.49 million b/d.

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