Oil prices held near nine-month highs on Thursday, bolstered by record low crude oil inventories in the United States, despite OPEC producing well above quotas in an effort to moderate prices.
“We would like to have prices a little bit down,” Purnomo Yusgiantoro, president of the Organisation of the Petroleum Exporting Countries, told Reuters in Jakarta.
Despite comments from the cartel, which controls half of world crude exports, benchmark U.S. light crude futures traded at $33.70 a barrel, up eight cents. London Brent crude stood up four cents at $30.80.
Cold weather has helped push prices to nine-month highs this week, as a freezing front now buffeting the U.S. Northeast is expected to increase demand for winter fuel in the world’s biggest heating oil market, which in turn should cause stockpiles to fall.
Supply fears were only marginally eased on Wednesday with data from the U.S. government showing national distillate stocks, including heating oil, rose a bigger-than-expected 6.4 million barrels to 135.5 million barrels in the week ended January 2.
Despite the build, prices remain very near this week’s earlier post-Iraq war high of $34.35 a barrel.
“There are two main reasons for this in our view. Firstly a wave of very cold weather moving across the U.S. Northeast which is expected to persist into next week means that market participants are more concerned about future movements in heating oil inventory than in recent history,” said Barclays Capital analyst Kevin Norrish.
“Furthermore the market is firmly underpinned by the extremely low level of U.S. oil inventory.”
Wednesday’s report showed crude inventories falling to 269 million, their lowest since October 1975.
Purnomo, also Indonesia’s oil minister, said OPEC wanted prices to fall to $28 for the basis of OPEC basket of crudes, which now stands at $30.33.
“OPEC has contributed what is necessary to produce to stabilise the price,” he said.
The cartel, due to meet in Algiers on February 10 to consider output policy, faces a dilemma because it may be necessary to cut supply in preparation for the second quarter when demand generally falls.
But high world oil prices would make a cut politically difficult, drawing criticism from major consumers like the United States that in 2003 had to swallow the highest average oil price in more than two decades.
Purnomo said supply leaks by OPEC members over official production was helping to contain oil prices and added that a cut in production was not a foregone conclusion at the Algiers’ meeting.
“I would say it’s really too early to say. A lot of analysts are saying that OPEC is meeting in Algiers to cut production but I would not say that yet,” he said.
The group’s 10 members bound by quotas collectively overproduced the 24.5 million barrel per day (bpd) limit by an estimated 1.6 million bpd in December, a Reuters survey found.