High stocks pin down prices

15 February 2002

Weak demand and rising US stocks kept prices in the range of $20 a barrel for Brent crude in the week ending 13 February. Figures released by the American Petroleum Institute showed that crude oil stocks increased by 4.7 million barrels in the first week of February to 320.7 million barrels as imports surged by some 2 million barrels a day (b/d) to 9.5 million b/d.

The unusually large rise in imports by the world's biggest consumer of oil was partly attributed to the arrival at port of delayed cargoes stuck off the east coast by bad weather. Pressure on prices, however, looks set to continue following the US government's decision to add a further 18 million barrels to the national strategic petroleum reserve (SPR). The move is part of Washington's plan to build the SPR to a level of some 700 million barrels.

Traders say the market was also affected by comments made by Saudi Arabian Petroleum & Mineral Resources Minister Ali Naimi. Speaking at a press conference in Riyadh on 12 February, Naimi said he would like to see prices stay at around $20 a barrel, somewhat below OPEC's target price of $22-28 a barrel.

Fears of an outbreak in hostilities between Iraq and the US have also continued to unsettle the market. Iraq has refused to comply with the US government's demands to allow UN weapons inspectors into the country despite the threat of US military action. 'I will reserve whatever options I have,' said US President Bush on 13 February. 'I'll keep them close to my chest. Saddam Hussein needs to understand that I'm serious about defending our country.'

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