Oil: US crude stocks drop

Oil rose above US$62 a barrel on Wednesday after a US government report showed crude oil inventories unexpectedly fell in the world's largest oil consumer, the first decline in six weeks.

Crude oil stocks in the United States fell 1.3 million barrels, the Department of Energy said in a report, led by a drop in imports to 9.33 million barrels per day. Analysts had expected inventories to rise by 2.5 million barrels.

"The eye-catching one is crude," said Mike Wittner, global head of energy market research at Calyon in London. "If imports start to come in at a 9.3 million-barrel type of number, that would be very bullish." US light crude for May delivery was up 31 cents at US$62.65 a barrel by 1810 GMT. London Brent crude traded 45 cents higher at US$62.58.

Petrol stocks in the US, the focus of some traders' attention amid a change in specifications and ahead of the summer driving season, fell a more-than-expected 2.3 million barrels, the report said.

But refinery runs rose 1 percentage point to 86.7 per cent of capacity, double the average expected 0.5 percentage-point increase, helping to ease concern about supplies.

"We did see a larger draw than expected, but that draw was mitigated by a significant increase in refinery runs," said analyst Jim Ritterbusch of Ritterbusch and Associates.

"That's leading a lot of people to believe the worst is over and we're out of the woods." Rising US crude stocks in 2006 has helped counter violence in Nigeria that has cut output there and concern that tension over Iran's nuclear work could disrupt supply.

SAUDI CUSHION

Saudi Arabia and other Opec members have been pumping close to the limit in a bid to calm prices that hit a record US$70.85 last August as hurricanes disrupted Gulf of Mexico supplies.

Top oil exporter Saudi Arabia vowed on Wednesday to maintain at least 1.5 million bpd of unused production capacity to guarantee its role as trustworthy supplier to the world.

To fulfil that aim, the kingdom sped through its US$850 million Haradh oilfield project -- now pumping full flow at 300,000 bpd, Saudi Oil Minister Ali al-Naimi said.

The Saudi minister saw no let-up in increasing consumption despite the historically high cost of fuel.

"Price levels are not harming economic growth...From now to 2030, demand on oil is expected to grow by 50 per cent, therefore Saudi Arabia started lifting its production capacity," he said.

Output from Opec's 11 members in March is expected to slip 300,000 bpd to 29.7 million bpd after militant attacks hit supply in Nigeria, consultant Petrologistics said on Wednesday.

The figure was down from a revised estimate of 30 million bpd in February, the consultancy said.

Besides the production loss in Nigeria, Iran's standoff with the West over its nuclear programme has helped put a floor under prices. Iran is the world's fourth-largest oil producer.

The US still believes the UN Security Council can reach agreement in coming days on a statement calling on Iran to suspend uranium enrichment activities, a senior envoy said on Wednesday.

Iran had said on Tuesday it would not be bullied by the US over its nuclear programme and was not worried that the country had been referred to the Council.

- REUTERS