Oil: Price jumps above US$59 on Norway outages

LONDON - Oil extended its rally on Friday from a 2006 low after Norway ordered the shutdown of two oilfields that pump almost 13 per cent of the output in Western Europe's largest producer.

The operators of Norway's Snorre A and Draugen oilfields said they will halt 280,000 barrels of oil equivalent per day of output for a week or two to make safety improvements to lifeboats.

"The main factor is Norway," said Mike Wittner, oil analyst at Calyon investment bank in London. "That's obviously supportive for the market."

US crude rose US$1.16 to US$59.02 a barrel at 1708 GMT. Prices touched US$57.22 on Thursday, the lowest since Dec. 19. London Brent crude climbed US$1.24 to US$60.02.

The Norwegian Petroleum Safety Authority ordered the operators of the two fields to shut output due to inadequate lifeboat standards.

Norway's Statoil said it will close Snorre A for seven to 10 days. Royal Dutch Shell said Draugen will remain closed while repairs were made over an estimated one to two weeks.

The shutdowns will equal almost 13 per cent of the country's oil production, which amounted to 2.25 million barrels per day in September according to figures released last week.

Oil also drew support from a surprise drop in winter fuel inventories in top consumer the United States.

The US government on Thursday reported that distillate inventories fell by 1.6 million barrels last week, contrary to forecasts for an increase.

Watching Opec

Traders were also watching moves by the Organisation of Petroleum Exporting Countries, source of more than a third of world supply, to agree a cut in output.

An Opec official said the group was likely to meet next week in Qatar to finalise a deal to remove 1 million barrels a day from world markets.

"There is very, very likely to be a consultative meeting in Doha on Oct. 20," said the Opec official, adding it would last a day or two. "Many ministers feel very strongly about meeting face-to-face."

Opec's first plan to cut production since April 2004 was first aired a week ago, but ministers have failed to reach consensus on implementation.

The group is acting after oil fell from a peak of US$78.40 hit in July, alarming some members. Still-healthy US winter fuel stocks and delays in finalising the Opec cut may limit the rally, analysts said.

Warm autumn weather has already sapped distillate demand and US government forecasters said this week they expected warmer-than-average temperatures across much of the US for the winter season.

"We still have comfortable stocks and temperatures are still extremely mild," said Frederic Lasserre of Societe Generale.

"The market is still watching Opec being still very confused and at the end of the day not really credible."

- REUTERS