OPEC hinted today that it could reduce its crude oil output ceiling in the second and third quarters of 2006.
For now, OPEC has maintained its high output ceiling of 28 million barrels per day, adopted in June 2005, when crude oil exceeded the then-record breaking $50 per barrel level.
“Having reviewed the oil market situation, [OPEC] observed…commercial stocks, especially of crude oil, have been building,” stated OPEC.
OPEC added that its officials will hold another meeting Jan. 31 to re-assess crude oil supplies. Through November, crude oil prices hovered at the high-$50 level. Since early December they rose to around $60 due to increased petroleum demand due to cold weather.
According to the Energy Information Administration, U.S. crude oil stocks have exceeded the average range since April and now approach the 325-million barrel mark—well above average.
Denton Cinquegrana, markets editor for the Oil Price Information Service (OPIS), told FleetOwner that the tone OPEC chose was rather conservative considering that, indeed, oil markets are well supplied.
“It seems like there’s a bubble that may end bursting in the crude oil market,” Cinquegrana told FleetOwner “OPEC wants to keep control of the prices. Their tone was more a means of not scaring another $2 to $4 [per barrel] into the market. However, if they continue to produce oil at $61 per barrel they certainly won’t be crying about that.”
As far as diesel goes, as of the week ending Dec. 4, prices have fallen for five weeks in a row. However, that trend is reversing as cold weather sets in. The national average price for a gallon of diesel today is $2.551, according to OPIS, compared with EIA’s week ending Dec. 4 average of $2.425. EIA will release its report for the average national diesel price for the week ending Dec. 11 later today.
For the full year 2006, EIA forecasts diesel prices to average $2.54 per gallon, based on an average crude oil price of $63 per barrel.
For more detailed information on diesel prices, go to www.fleetowner.com/diesel.xls.
