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NEW YORK - Oil prices rose today after a US government report showed a surprising drop in crude stockpiles, a day before Opec ministers meet in Nigeria to decide whether to deepen a production cut.
US commercial crude stockpiles dropped by 4.3 million barrels last week as imports declined, according to the Energy Information Administration, defying market expectations of a 600,000 barrel draw.
"It's a bullish report," said Bill O'Grady, analyst at A.G. Edwards. "The draw on crude was unexpected."
US crude futures rose 62 cents to US$61.64 a barrel by 6.30pm Wednesday GMT (7.30am Thursday NZT). London Brent crude rose 6 cents to US$61.58.
The market is on edge as Opec ministers gather in Abuja ahead of their meeting tomorrow to decide on their production policy for the first quarter of 2007. The group is at odds over whether to add to a 1.2 million barrel per day cut agreed in October for implementation Nov. 1.
The International Energy Agency (IEA), the voice of some of the world's biggest oil consumers, said the earlier Opec cut had already affected world stockpiles and asked Opec not to cut further heading into winter.
"Opec has tightened the market quite substantially," IEA supply analyst David Fyfe said.
"With prices in excess of US$60, the uncertainties over winter weather and some of the risks we are flagging about non-Opec growth, I don't think we would see a further cut as being merited at this time."
Despite initial indications that some in Opec favored a second output cut at their meeting tomorrow, delegates said most members preferred to see the group focus on meeting the previous 1.2 million barrel per day (bpd) reduction before making any new commitments.
"I don't think there will be any cut," the head of Libya's delegation, Shokri Ghanem, told Reuters.
Opec's Gulf members are in agreement Opec does not need to cut output further at meeting but adhere fully to the reduction agreed at the group's last meeting in October, an Opec delegate said today.
Most Opec ministers agree the market is oversupplied -- crude oil stocks in top consumer the United States have near a 13-year high -- but some fear cutting output now could drive prices further above US$60 and hurt consumer nations.
The group's members have delivered an estimated two-thirds of the cut it agreed in October, its first in over two years, helping halt a precipitous 25 per cent fall in oil prices from their record high US$78.40 a barrel reached in mid-July.
- REUTERS
