Oil falls near $49

[notiCIas]

Oil falls near $49

Crude prices hover at 10-week low as higher OPEC supply and swelling oil stocks weigh on the market.

May 2, 2005: 6:27 AM EDT

SINGAPORE (Reuters) - Oil prices fell more than 1 percent Monday, hovering at a 10-week low just above the $49 mark as higher OPEC supply and swelling crude stocks in the United States weighed on the market.

U.S. light crude dropped to an intraday low of $49.05 a barrel, the lowest since Feb. 22 and almost 16 percent below the record $58.28 struck on April 4. At 6:23 a.m. ET, the June contract stood at $49.10, down 62 cents.

Markets in Singapore and London were closed for a public holiday.

"It's a split market for the time being. Short term it's definitely weak if you look at stocks and OPEC production," said Tony Nunan at Mitsubishi Corp. in Tokyo. "But medium term, three to six months out, it looks like supply could be really tight."

Prices came under selling pressure last week as U.S. crude stocks jumped by a surprising 5.5 million barrels as imports into the world's biggest consumer surged to almost 10.9 million barrels per day (bpd), the third-highest weekly volume on record.

The Organization of the Petroleum Exporting Countries has pledged to increase supplies to cool prices down to below $50 a barrel, which has helped to build U.S. crude stockpiles to the highest level since mid-2002.

The cartel has an official production ceiling of 27.5 million barrels per day (bpd), excluding Iraq.

"Since our last meeting in Isfahan (in mid-March) until now, there is 2 million that has been added to the market," OPEC President Sheikh Ahmad al-Fahd al-Sabah said Monday.

"When we were in Isfahan ... the (OPEC 10) production was 27.7 million and now our real production is 29.7 million."

Production peak
Including Iraqi production, OPEC's current output would beat levels of over 30 million bpd pumped late last year that took OPEC supply to 25-year highs.

Sheikh Ahmad had said the cartel would add 500,000 bpd of fresh supplies to world oil markets starting from May. But he said "by numbers, we already have more than 500,000 of real production in the market."

OPEC, which controls half the world's crude exports, meets again June 15 in Vienna, Austria, to chart production strategy for the second half of the year.

Most of the 10 OPEC members with quotas -- Iraq is excluded -- are now producing at full tilt as the exporter group seeks to encourage stockbuilding in the coming months to create a buffer for strong demand later this year.

But dealers remain concerned over a potential gasoline supply crunch in the peak-demand summer months or a shortage of heating fuel towards the end of the year as the northern hemisphere heads into winter.

Some analysts worry that high commodity prices are starting to dent world economic growth by fueling inflation and prompting a rising trend in global interest rates.

The U.S. economy grew at its slowest pace in two years during the first quarter -- an annual rate of 3.1 percent -- fanning concerns of a possible slowdown in oil demand growth.