Oil rises on US supply constraint

Crude oil rose for a second day in New York after US stockpiles increased less than expected and a rebound in stock prices bolstered investor confidence.

US oil inventories rose 1.2 million barrels last week, the Energy Department said yesterday, about half the gain forecast in a survey of analysts. Crude gained from a two-month low after US equity prices, which earlier fell to a four-month low, recovered.

"Yesterday we saw the equities market pull back in the US so that restored some confidence in overall markets,'' said Steve Rowles, an analyst at CFC Seymour in Hong Kong. "It's not the micro-economy we're looking at right now, but more the macro-economy and overall global growth and how that's going to impact oil.''

Crude oil for April delivery rose as much as 38 cents, or 0.7 per cent, to $58.54 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $58.36 at 4:05 pm in Singapore.

The contract rose 23 cents, or 0.4 per cent, to $58.16 a barrel yesterday, ending a four-session, 6.3 percent slide. Prices fell to $57.30 before recovering with U.S. stock prices. The S&P 500 Index rose 0.7 per cent to 1387.17 after earlier falling as much as 1 per cent. It dropped 2 per cent the day before.

In London, Brent crude for April settlement was at $61.30 a barrel, up 24 cents, in electronic trading on the ICE Futures exchange at 3:21 pm Singapore time. The contract expires today. The more active May contract was at $61.53, up 24 cents.

Venezuela's oil minister said today that members of the Organisation of Petroleum Exporting Countries, producer of 40 per cent of the world's crude, agree that they should continue the cutbacks on output they set at two meetings last year.

Asked if there was a consensus to roll over the reductions in output agreed in October and December, Rafael Ramirez said: "Yes, it's a quiet meeting.'' OPEC is meeting in Vienna today. Saudi Oil Minister Ali al-Naimi said there is no need to cut oil production and the current market situation is satisfactory, the Al-Hayat newspaper reported.

"The oil market is in a satisfactory position,'' Al-Naimi told the London-based, Saudi-owned Al-Hayat. "OPEC ministers don't need to introduce any alterations to production.''

Ministers of the 12-nation group agreed to lower production at their two previous conferences.

Angola, which joined OPEC in January, won't be subject to a production cap, Al-Hayat reported without saying where it got the information.

"At this time, they are likely to keep production,'' said Naohiro Niimura, director of commodities at Barclays Capital in Tokyo. "If things continue between April and June when supplies are expected to rise, there is concern that production is cut too much and inventories are constrained.''

Oil stockpiles in the US, the world's largest oil consumer, rose as imports jumped from a week earlier when shipments were delayed by fog on the Houston Shipping Channel. Inventories are 5.7 per cent higher than the five-year average for the period, the department said.

Supplies also rose as US refiners unexpectedly reduced production. Capacity utilisation fell 0.2 percentage points to 85.6 per cent. A 0.5 percentage point increase was expected, according to the analyst survey.

Refining rates have been close to 86 per cent the last four weeks as fires and breakdowns trimmed output at plants in Texas, California, Delaware, Ontario, Pennsylvania and Colorado.

A steam problem caused boilers to shut down at Royal Dutch Shell's 156,000 barrels a day Martinez refinery in California, the company said yesterday.

Gasoline for April delivery was at $1.9225 a gallon after falling 0.2 per cent to $1.9283 a gallon yesterday. Prices are up 20 per cent this year and reached a 29-week high on March 13.

US gasoline supplies fell 2.49 million barrels in the week ended March 9 to 213.9 million barrels, the report showed. A decline of 2.38 million barrels was expected, based on the analyst survey.

"A lot of people are expecting unleaded gasoline to be coming back into the market,'' said Mark Waggoner, president of Excel Futures. "These refineries are going to start pumping it out again.''