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Oil=20 Trades Near $96 After Rising on OPEC Outlook, Refinery Fire=20

By Christian Schmollinger and Nesa Subrahmaniyan

Feb. 19 (Bloomberg) -- Crude oil traded near $96 a barrel = in New=20 York after rising yesterday on speculation OPEC will curb = production=20 and refinery disruptions will limit fuel supplies.

The Organization of Petroleum Exporting Countries, due to = meet=20 March 5, may cut production as winter heating demand wanes, = oil=20 ministers from Algeria and Iran said the past week. Gasoline = jumped=20 as much as 1.3 percent yesterday after an explosion shut = Alon USA=20 Energy Inc.'s Big Spring refinery in Texas.

``OPEC wants to hold the price at a high level,'' said = Tetsu=20 Emori, a fund manager at Astmax Ltd. in Tokyo. ``They keep = saying=20 that the demand in the second quarter will fall further so = they need=20 to make a production cut. They don't care about the supply = and=20 demand balance.''

Crude oil for March delivery was at $96.34 a barrel, up = 84 cents=20 from the Feb. 15 close, in after-hours electronic trading on = the New=20 York Mercantile Exchange at 1:03 p.m. in Singapore. Floor = trading on=20 the exchange was closed yesterday for the Presidents' Day = holiday.=20

Oil gained as much as 1 percent to $96.45 yesterday = before=20 closing at $95.89. Those trades will be booked today for = settlement=20 purposes because of the U.S. holiday.

OPEC pumps about 40 percent of the world's oil. The group = lowered=20 its 2008 oil demand growth forecast to 1.4 percent last = week, citing=20 the risk of recession in the U.S. It is also projecting a = 1.6=20 million-barrel reduction in daily demand in the second = quarter as=20 heating demand wanes.

Lower Consumption

``OPEC is certainly not going to let any supply surplus=20 develop,'' said David Moore, the commodity strategist at=20 Commonwealth Bank of Australia Ltd. in Sydney. ``The oil = market,=20 particularly on the refinery side, has just been beset by=20 problems.''

OPEC won't increase production as demand may drop by 1.8 = million=20 barrels a day in the second quarter, because of the U.S. = economic=20 slowdown, refinery shutdowns for maintenance and lower fuel=20 consumption as winter comes to an end, Chakib Khelil, the = group's=20 president said on Feb. 13.

``Oil markets are really more concerned about growth in = China and=20 India as well as the prospect for further supply cuts, = rather than=20 concerns about the U.S. economy,'' said Gerard Burg, a = minerals and=20 energy economist at National Australia Bank Ltd. in = Melbourne.=20 ``Growth in demand has really been driven by Asia.''

Brent crude for April settlement was at $95.05 a barrel, = up 14=20 cents, on London's ICE Futures Europe exchange at 12:55 p.m. = Singapore time. The contract rose 28 cents, or 0.3 percent, = to=20 $94.91 a barrel yesterday.

The North Sea Sullom Voe terminal in Scotland's Shetland = Islands=20 resumed normal operations yesterday after berthing was = halted for a=20 day because of high winds. Berthing has stopped at least 12 = times=20 this year because of high seas.

Blast Boosts Gasoline

Gasoline for March delivery was at $2.53 a gallon in New = York, up=20 1 percent from last week's close. The contract gained after = the=20 blast at the Alon plant yesterday.

The fire in part of the 70,000 barrel-a-day refinery has = been=20 contained and the company doesn't yet know the cause of the = blast,=20 Alon Spokesman Blake Lewis said in a telephone interview. =

``Refineries are either in maintenance or starting to = ramp up=20 gasoline production,'' National Australia's Burg said. ``Any = outage=20 at this time is going to influence gas markets.''

Gasoline demand in the U.S., the world's largest oil = consumer,=20 usually peaks June through August as summer vacation travel = puts=20 more cars on the nation's roads. U.S. stockpiles have risen = for 14=20 weeks and held 229.2 million barrels on Feb. 8, a nine-year = high.=20

Prices Rebound

Oil prices jumped 4.1 percent last week after economic = reports=20 out of China and Japan suggested Asian demand for = commodities may=20 remain strong.

New York oil futures reached a record $100.09 a barrel on = Jan. 3.=20 Prices dropped as low as $86.24 this month as U.S. oil and = gasoline=20 stockpiles rose amid concern that a recession in the world's = largest=20 energy consumer will hurt demand.

Rising stockpiles and declining heating demand should = allow oil=20 prices to ease to an average $83 a barrel in the second = quarter from=20 $91.66 in the first, National Australia forecasts.

``But that said, if we see a cut in OPEC supply, or if we = see a=20 situation where there is a major disruption to supply = elsewhere,=20 that would obviously lead to prices being driven higher = again,''=20 Burg said.

To contact the reporters on this story: Christian = Schmollinger in=20 Singapore at christian.s@bloomberg.net=20 ; Nesa Subrahmaniyan in Singapore at nesas@bloomberg.net .=20

Last Updated: February 19, 2008 00:16 EST=20

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