Crude strong as Opec predicts $100 oil
Oil prices were strong in the first two weeks of December, as bullish talk from Opec ministers ahead of their meeting in Quito combined with a sharp draw on US crude stocks and more weakness in the dollar to support crude markets
In New York, on 9 December, the front-month contract for light sweet crude was trading just above $88/b.
That was a dip from highs seen earlier in the month, but market sentiment is decidedly bullish. Goldman Sachs, an investment bank, forecast that oil prices would average $100/b in 2011 (see p2).
Ahead of Opec's latest meeting, meanwhile, there was little indication that the group was worried about the strength of the oil price, which has risen by more than $20/b since the summer. Shokri Ghanem, head of Libya's National Oil Company, said $100/b could come "pretty soon" – and only then would the group consider revising output quotas. Ali al-Naimi, Saudi Arabia's oil minister, said a range of $70-90/b would leave Opec countries happy. Since 2008, Opec's target has been $75/b – the average price its basket of crudes achieved in the past year.
The dollar's weakness, as an easing of worries in the eurozone helped strengthen the euro, and a sharp draw in US stocks have also given strength to prices. For the week ending 3 December, the US' EIA said inventories had dropped by 3.8m barrels, to 355.9m barrels.
US natural gas prices, meanwhile, continue to firm on the back of cold weather. An 89bn cf decline in underground storage, to 3.7 trillion cf, for the week ending 3 December also helped. In New York, the front-month contract was trading at around $4.55/m Btu – still low, but much higher than in recent months. A blast of cold weather across Europe has spiked prices in the UK, which were closing in on $10/m Btu as Petroleum Economist went to press. LNG exporters may see a welcome buyer for spot cargoes in the country.