/ 18 November 2005

Oil prices firm after five-month low

World oil prices firmed on Friday, after striking five-month low points overnight in New York, while traders turned to the Organisation of Petroleum Exporting Countries’ (Opec) revised predictions for global demand growth, dealers said.

Investors were digesting Opec’s monthly forecast of a rise in demand, especially from energy-hungry China, but were also monitoring United States energy stocks and weather patterns across the northern hemisphere ahead of winter.

New York’s main contract, light sweet crude for delivery in December, rose four cents to $56,38 per barrel in electronic dealing.

On Thursday, the contract had dived $1,55 to close at $56,33, the lowest finish since June 15.

In London on Friday, the price of Brent North Sea crude for January delivery gained 20 cents to $55,05 per barrel.

Crude futures had slipped in New York overnight, with US crude stockpiles deemed sufficient for the winter months, but investors were absorbing the latest report from Opec.

”This sign that Opec is seeing better demand could be an ominous sign that the China oil-consumption machine will once again catch oil-market watchers off guard,” said Phil Flynn, an analyst with Alaron Trading.

Opec had forecast on Wednesday that global demand would increase by 1,2-million barrels per day this year, downplaying the idea that recent prices had resulted in ”demand destruction”, whereby higher costs erode demand.

”Following six consecutive monthly downward revisions, world oil demand has shown signs of recovery in the last couple of months,” Opec said in its November report.

”Further undercutting the arguments for ‘demand destruction’, these higher figures are supported by vigorous preliminary growth data from developing countries, a brighter outlook for the world economy … and a rebound in Chinese apparent demand,” Opec said. — Sapa-AFP