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Survey indicates oil price may fall
Updated: 2004-09-13 09:50

Crude oil may fall this week as rising production from OPEC helps replenish global inventories, according to a Bloomberg News survey of traders and analysts.

Nineteen of 37 respondents, or 51 per cent, predicted a decline in crude-oil futures. Eleven forecast an increase and seven said prices would be little changed.

Oil, close to US$45 a barrel in New York last week, may not stay above US$40 for long because consumers are "well supplied," the International Energy Agency said. World output in August exceeded this quarter's expected demand by 2.6 per cent. Supplies in the 30-nation Organization for Economic Co-operation and Development rose 18 million barrels in July to 2.58 billion.

"There's an oversupply of crude oil," said Anthony Nunan, manager for international petroleum business at Mitsubishi Corp in Tokyo. "OPEC is overshooting on supply just when US refiners are in fall turnarounds," the period when they reduce output and get ready to produce more heating oil for winter.

A greater-than-expected drop in crude-oil inventories prompted a 4.3 per cent rally in New York oil futures last Thursday, and the gain for the week so far now stands at 1.3 per cent. In the previous Bloomberg price survey, 44 per cent predicted a rise and 38 per cent a decline.

The Organization of Petroleum Exporting Countries (OPEC), which pumps two out of every five barrels of oil worldwide, raised production quotas in July and August. OPEC's actual output rose to 29.92 million barrels a day in August, reaching a 25-year high for a second month, according to Bloomberg data. The group will meet on Wednesday in Vienna.

Crude oil for October delivery on the New York Mercantile Exchange was up 23 US cents, or 0.5 per cent, at US$44.84 a barrel in electronic trading at 1:43 pm London time on Friday. It closed at a two-week high on Thursday. Prices are up 53 per cent from a year ago.

Oil reached US$49.40 a barrel on August 20, the record since New York futures began trading in 1983, on concern that rising demand had absorbed most of the world's excess crude output, leaving no cushion in case of disruptions. Attacks on oil facilities in Iraq that helped lift prices have subsided this month.

OPEC may signal this week that it will continue to pump as much oil as possible, said Shun Maruyama, an economist at UFJ Institute Ltd in Tokyo. "OPEC feels the current price level is high and there is a chance they will raise the production quota."

Michael Fitzpatrick, vice president of energy risk management with Fimat USA in New York, said prices are likely to fall this week "as OPEC continues to jawbone the market lower."

"Of course, this assumes no new fresh attacks on the infrastructure in Iraq," Fitzpatrick said. "A bomb in the right place will put prices back up."

Surging economies in the US and China contributed to faster-than-expected growth in petroleum demand this year, which in turn helped lift oil prices. Now, "the world economy seems to be slowing down a little," UFJ Institute's Maruyama said.

The Paris-based International Energy Agency, oil adviser to 26 industrialized nations, said oil demand growth will slow next year, rising by 1.77 million barrels a day to 83.92 million compared with an increase of 2.52 million barrels a day this year.

Economists are cutting their forecasts for US growth, partly because of higher energy costs, a monthly Bloomberg News survey showed.

The US, which consumes a quarter of the world's oil, will grow at a 3.7 per cent annual rate from July through September, slower than the 3.9 per cent estimated last month, according to the median of 61 forecasts.

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