Tuesday, July 1, 2008

Crude Oil Rises a Second Day as IEA Predicts `Tight' Supplies

By Christian Schmollinger

July 2 (Bloomberg) -- Crude oil rose for a second day in New York to more than $142 a barrel after the International Energy Agency said supplies may not keep up with demand through 2013.

The IEA said in a report that spare OPEC capacity will shrink by 2013, keeping the market ``tight.'' The growth in global excess supply will peak at about 2.5 million barrels a day in 2010, dropping to less than a million a day for the next three years, the agency said.

``It's quite clear that we're at a stage of oil supply and production where we won't be able to increase production to respond to demand,'' Greg Canavan, head of research at Fat Prophets Management Ltd. in Sydney, said in an interview with Bloomberg Television. ``Longer term those supply and demand fundamentals in the next economic upswing will come back into play.''

Crude oil for August delivery rose as much as $1.38 to $142.35 a barrel and was at $142.30 at 9:46 a.m. Singapore time in after-hours electronic trading on the New York Mercantile Exchange. Oil touched a record $143.67 on June 30.

Brent crude oil for August settlement rose as much as $1.53, or 1.1 percent, to $142.20 a barrel on London's ICE Futures Europe exchange. It was at $142.20 a barrel at 9:47 a.m. Singapore time.

The contract yesterday closed up 84 cents at $140.67 a barrel. Brent reached a record $143.91 a barrel on June 30.

PDVSA Strike

Petroleos de Venezuela SA said operations in the Orinoco Belt were normal, denying claims by labor leaders that a strike had shuttered four pumping and upgrading projects nationalized last year.

About 4,000 workers are on strike, Rafael Zambrano, executive secretary of the Fedepetrol union, said in a telephone interview yesterday. The projects affected include joint ventures between PDVSA, as the state oil company is known, and Chevron Corp., Total SA and StatoilHydro ASA, Zambrano said.

PDVSA said the Orinoco projects were operating normally. The only labor action was a road blockade by 60 workers from a contractor, Eulogio Del Pino, a company board member, said in an e-mailed statement.

The Orinoco Belt produces more than 600,000 barrels a day of extra-heavy crude, which is upgraded into lighter crude for export. That contributes to the 1.02 million barrels a day of oil that Venezuela exports to the U.S.

U.S. crude-oil inventories probably fell 700,000 barrels last week from 301.8 million barrels, according to the median estimate of seven analysts surveyed by Bloomberg News. It would be the sixth decline in seven weeks.

Gasoline supplies probably rose by 500,000 barrels from 208.8 million barrels.

``I don't think the U.S. needs as much inventory anymore because we've seen significant declines in gasoline consumption and diesel consumption so we don't need as much crude oil on hand,'' Tom Kloza, chief analyst at Oil Price Information Service in Wall, New Jersey, said in an interview with Bloomberg Television.

U.S. gasoline demand fell 2.1 percent last week, the 10th consecutive decline, a MasterCard Inc. report yesterday showed.

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