Oil prices increased above $64 a barrel after a rush in the preceding session. This is due to the fact that traders have reacted to warnings that OPEC production was at its lowest point in two years.
Iraq and Algeria as well as the (Organization of Petroleum Exporting Countries) OPEC member nations also added to the upward pressure. As consumers predicted, the chaos has resulted to the squeezing of gasoline supplies as the summer driving season approaches. In Europe, light, sweet crude for May delivery increased 31 cents to $64.16 a barrel in electronic trading on the New York Mercantile Exchange by the afternoon.
The contract increased almost $2 Thursday to close at $63.85 a barrel. This happened after the International Energy Agency (IEA) warned that output by the OPEC had dived to its lowest level in more than two years on production outages and self-imposed cuts.
According to the Platts survey of OPEC production last month, the average 26.54 million barrels pumped a day by OPEC members still represented overproduction of 740,000 barrels a day above the group's production target. In London, the Brent crude contract for May delivery increased 62 cents to $69.34 a barrel on the ICE Futures exchange.
Oil prices were also supported after the U.S. government reported dwindling domestic gasoline stockpiles in the face of unflagging demand. A further rise in gasoline demand was necessary to boost crude towards $70 a barrel as Ken Hasegawa of Tokyo brokerage Himawari CX told Dow Jones Newswires.
The U.S. Energy Information Administration reported Wednesday that the sum of American gasoline stockpiles declined by 5.5 million barrels last week to 199.7 million barrels. Analysts had expected a 1.3 million barrel decrease as according to a survey by Dow Jones Newswires. "Several refinery glitches in the U.S.... further raised worries concerning gasoline supply ahead of the summer driving reason," noted Vienna's PVM Oil Associates.
Another factor linked to the decline is geopolitics. After oil and gas-rich Algeria was injured by bomb attacks Thursday, worries about the oil producer's control over an Islamic insurgency that peaked in the 1990s heightened even more.
A car bomb blasted the walls off the Algerian prime minister's office in Algiers which, along with two other coordinated attacks at a suburban police station, killed 33 people. Separately, a suicide bomb attack hit the Iraqi parliament building in Baghdad just last Thursday. The attack occurred inside the Green Zone, the most heavily guarded area in the country. "What is there about this environment that could possibly produce a conclusion that prices are coming down?" said Fimat USA analyst John Kilduff.
In the past couple of weeks, oil prices have been volatile increasing about $5 a barrel after Iran detained 15 British sailors and marines. Enthusiasts seemed to have successfully sought the aid of to stop the phenomenal increase. Prices dropped on the release of the detainees last Thursday. Additionally, the prices slid almost $3 Monday on expectations of oversupply at a key North American delivery point before gradually improving. But fluctuations continue nonetheless...
