The latest inventory data for the week ending 29 October showed crude stocks rising by

2 million barrels to 334.3 million barrels. Distillate supplies fell by 2.7 million barrels to 141.3 million barrels and gasoline inventories slipped by 2.8 million barrels to 204.6 million barrels. However, traders were reassured somewhat by the increases in refinery runs also detailed in the Energy Department report.

‘Refinery utilisation is

ticking up, which should at the margin start to take some of the marginal tightness out of products and into crude oil,’ says Paul Horsnell, analyst at Barclays Capital. ‘That is going to be needed, because in terms of

forward cover oil products are now starting to look a little on the tight side.’

OPEC continues to indicate that plentiful global stockpiles provide ammunition for a possible further production cut at the group’s 14 December meeting, with most countries now to some degree implementing mid-October’s 1.2 million-barrel-a-day (b/d) reduction.

Saudi Arabia’s Petroleum & Mineral Resources Minister Ali Naimi on 6 November described inventories as ‘very high’, adding: ‘The market is not in balance We will look at the numbers, we will assess the market. If it is out of balance, we will take some more action.’ The OPEC kingpin’s comments immediately pushed up prices.

Naimi’s words were echoed more forcefully by OPEC

president and Nigerian Minister of State for Petroleum Resources Edmund Daukoru on the same day. ‘A December quota cut may still be necessary because the market is still soft,’ he said. ‘$60 [a barrel] will not hurt the world economy.’

Prices seem so far to have

failed to dent the Chinese thirst for oil, with data released in late October showing demand

growing by 7 per cent during the third quarter.

On the ground in Nigeria, the tension between local militants and international oil companies flared up again. Protestors on 7 November stormed an oil station operated by Italy’s Eni, taking almost 50 people hostage and forcing 50,000 b/d of output to be shut in. A total of 500,000 b/d of the country’s output is offline and the US consulate in Lagos issued a statement three days before the latest attack warning that such incidents were likely to intensify in the coming weeks.

Tension in the Middle East, as Iran carried out missile tests and reports emerged of the potential for renewed fighting between Israel and Hezbollah in southern Lebanon, also provided price

support.

(see Cover Story, pages 4-6, and Briefing, page 8)