LONDON, United Kingdom (Reuters):
Oil climbed to a two-month high over US$63 on Thursday as a weaker U.S. dollar, colder weather and news that OPEC could be getting bigger spurred buying.
The market also found support from an unexpected drop in U.S. winter fuel stocks. United States crude rose 70 cents to US$63.18 a barrel at 1754 GMT, after earlier reaching US$63.30, its highest since October 2. Brent crude rose $1.22 to US$64.29 a barrel.
Angola and Sudan followed Ecuador in saying on Thursday they may join OPEC - a move that would boost the power of the oil cartel, add impetus to resource nationalism and put international oil firms on their guard.
The three countries would boost OPEC output by two million barrels per day, or 6.0 per cent.
Seems bigger
"OPEC seems to have gotten bigger. On the surface it ought to be bullish for prices," said Mike Wittner of Calyon.
With prices above US$60, OPEC ministers this week have expressed conflicting opinions on whether an output cut was still necessary at the group's next meeting on December 14.
Venezuela's energy minister told Reuters it would propose an output cut of "possibly a little more than" 300,000 barrels per day.
Algerian Oil Minister Chakib Khelil said on Thursday he would support further cuts at the meeting.
But Kuwait's oil minister earlier this week told Reuters that prices were "very comfortable" and that he saw no need to deepen the 1.2 million bpd cut OPEC imposed from the start of November.
United States inventories of crude oil and refined products fell last week as imports eased and demand was robust, the Energy Information Administration (EIA) said on Wednesday.
Distillate stocks, including home heating oil, fell by one million barrels. Analysts had expected a stock build. "The unexpected pull on U.S. stock levels was an immediate catalyst for the market to trade up," said Andrew Harrington, a natural resources analyst at ANZ Bank in Sydney.
The news pushed oil prices above US$62 on Wednesday, helping the market finally break through a two-month-long trading rut.
But some traders were sceptical that this was the beginning of a longer term rally, as global fuel stocks remained healthy.
"I'm not convinced it will continue trading up. Signs are that this was probably a false break," said Christopher Bellew, an oil futures broker at Bache Financial in London.
Support
Oil found support from a weakening dollar, which fell to a 14-year trough against sterling and a 20-month low versus the euro earlier on Thursday. Gold spiked to its highest level since early August.
Forecasts for colder weather this week in the U.S. Northeast, the world's biggest heating oil market, also added to bullish sentiment.
Taken from the Financial Gleaner, Friday December 1, 2006.
