Oil: Prices rise as speculators defend US$50

NEW YORK - Oil prices rose on Thursday after speculators rushed in to defend a brief dip below US$50 a barrel, even as stockpiles in the United States zipped along at their highest level in nearly six years.

"There was an abrupt surge in prices just about five minutes before the close as a lot of paper buying and short-covering came in," a floor trader said.

US light crude settled up 70 cents to US$50.83 a barrel after slipping as low as US$49.50, while in London Brent crude futures gained 16 cents to US$51.13.

Prices are nearly 13 per cent below the record-high of US$58.28 for US crude hit in early April as robust production from Middle East Opec countries has boosted world supplies.

Government data released on Wednesday showed US crude stocks rose by 2.6 million barrels last week to 327 million barrels, their highest since July 1999. The rise, the 11th in the past 12 weeks, was more than double analyst forecasts.

"This stock level is consistent with vastly lower prices, so any upswing here may be limited both in price and duration," said Tim Evans, an analyst at IFR Energy Services.

"At some point, the market will need to shift gears dramatically from the focus on a lack of spare production capacity to a lack of spare storage capacity to hold all this stock," he added.

Petrol inventories in the world's biggest energy consumer rose 2.2 million barrels -- also more than expected -- to 213.5 million barrels, 11.3 million barrels higher than a year ago.

Opec oil exports were expected to continue rising into May, 270,000 barrels per day (bpd) above the April average, a leading shipping analyst said on Thursday, spelling likely continued increases in consumer inventories.

At the same time, more signals emerged that a prolonged stretch of high energy prices this year could slice more deeply into demand growth.

Federal Reserve Chairman Alan Greenspan said Thursday businesses may shift their capital spending in an effort to become more energy efficient if they believe oil prices are likely to stay high.

But some analysts remained convinced that any dip in prices below US$50 will be short-lived, particularly headed into the high-demand northern winter.

Barclays Capital cited as potentially bullish factors slower Russian production growth, political and technical problems in Iraq, which have limited oil flows, and tension over the nuclear programme of oil-producer Iran.

Having risen to a new post-Soviet high of 9.42 million bpd last September, output from Russia, the biggest non-Opec oil producer, has eased on seasonal factors and the crisis at stricken oil firm YUKOS.

On Wednesday, three leading Russian brokers reduced their forecasts for Russian oil output growth for 2005.

Troika Dialog brokerage cut its growth forecast to 2.8 per cent from 4.7 per cent, saying it now expected the world's No. 2 oil exporter to show a maximum average output of 9.44 million barrels per day this year compared to 9.19 million bpd in 2004.

Renaissance Capital, which has already lowered its forecast once this year, said in a note it was reducing it further to 3.1 per cent from 3.6 per cent. And Steven Dashevsky from Aton brokerage cut his estimate to 3.5 per cent from 5 per cent.

Exports from Iraq, which is a member of Opec but does not have an official production quota, fell in April to 1.88 million bpd from 1.91 million bpd, according to a Reuters survey, after bad weather disrupted export loadings from the southern Basra terminal in early April.

Iraq has been forced to export solely from the south as its northern pipeline has been mostly idle since mid-December when a sabotage attack stopped exports from Iraq's northern oilfields.

- REUTERS