Oil nears $34 as US stocks drop, Middle East bubbles

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Oil nears $34 as US stocks drop, Middle East bubbles

Thursday 12 October 2000 SINGAPORE: Oil prices hung close to three-week peaks on Wednesday, buoyed by fresh evidence of wafer thin US fuel stockpiles coupled with forecasts of further cold blasts on the way to North America.

Continued tensions in the Middle East amid frantic diplomatic activity to save the Israeli-Palestinian peace process also lent support to the market, although two weeks of bloody clashes appeared to ease.

US benchmark light crude futures stood 62 cents firmer at $33.80 a barrel, having briefly reached a $ 34 high at noon after new stocks' data was released following the close of New York dealings

Heating oil futures were also sharply higher, rising almost three cents to more than $1 per gallon.

Weekly inventory figures from the American Petroleum Institute (PI) showed an across-the-board fall in US crude and refined products stocks, with especially large declines for crude oil and middle distillates, which include key winter heating oil.

The API said national crude stocks were down by 3.9 million barrels in the week to October 6, while distillates dropped 3.3 million barrels and gasoline by 936,000 barrels.

The market had expected either a build or a slight draw.

"This (the API data) is very bullish across-the-board," said Tom Bentz, analyst with Paribas Futures. "Most people are surprised by these numbers."

US crude prices shot up to the $34 peak in out-of-hours electronic dealings, adding 82 cents to a gain of more than $1.30 in day-side trading on the New York Mercantile Exchange.

Earlier gains were fuelled by growing concerns that violence between Israelis and Palestinians could flourish into a bigger regional conflict and threaten crucial oil supplies from Gulf Arab states.

Worries of possible shortfalls in US fuel supplies this winter have kept oil above $30 over the last few months.

National heating oil stocks in the United States are 35 per cent below year-ago levels.

"This report reinforces the idea that distillate stocks are at critical levels," said Thomas Blakesle of Energy Merchant.

US oil prices have increased by $3 since Friday, almost halving the $7 lopped off prices by a US decision in September to unleash strategic crude reserves this month to ward off a supply crunch and quell this year's sharp price rally.

Analysts had warned that the release of strategic Petroleum Reserve oil would do little to improve availability of heating oil in the key US northeast consumption centre.

That region felt the first cold blast of winter earlier this week with temperatures falling well below seasonal norms and forecasts predicted two more waves of chilly weather next week.

Oil markets are also on tenterhooks awaiting developments in the Middle East, where international diplomatic efforts were continuing to end 13 days of Arab-Israeli violence.

Oil trader fears that the renewed the Israel-Palestinian troubles could embroil neighbouring countries were fuelled on Monday when Saudi Arabia sad it and other Arab nations would not stand idle if Israel took action against Lebanon and Syria.(Reuters)


-- Ain't Gonna Happen (Not Here Not@ever.com), October 12, 2000

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