Oil falls from 6-month high as global supplies to increase

Crude oil fell from a six-month high on speculation last week’s 10 per cent advance won’t be sustained as global output increases.

Exports from Iraq’s Kurdistan region will begin June 1 after the state oil ministry agreed to “expedite” shipments, the provincial government said on its website yesterday. Venezuela, OPEC’s fifth-largest producer, seized the assets of 60 oil-field service companies on May 8 to restore operations shut over contract disputes.

“At some point you do have to be asking the question as to just how far this can go,” said Toby Hassall, a research analyst at Commodity Warrants Australia Pty in Sydney. “The supply side really isn’t the focus of the market at the moment.”

Crude oil for June delivery fell as much as 68 cents, or 1.2 per cent, to $57.95 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $58.23 in Singapore.

The contract rose 3.4 per cent to $58.63 a barrel on May 8, the highest settlement since November 11, as slowing job losses in the US increased investor confidence and a drop in the dollar boosted the appeal of commodity investments.

Brent crude oil for June settlement declined as much as 54 cents, or 0.9 per cent, to $57.60 a barrel on London’s ICE Futures Europe exchange. It was at $57.76 at 12.51 pm Singapore time.

Last week’s jobs report in the US, the world’s largest oil consumer, added to investor confidence that the worst of the recession there may be over, boosting demand expectations, Hassall said.

Ongoing weakness in the dollar will support commodities and oil may resume its rally if US summer fuel demand is sufficient to start drawing down stockpiles there, he said.

On Monday, the euro surged to a six-week high against the dollar as gains in global equities has increased investors’ risk appetite.

Hedge fund managers and other large speculators changed their bets on the direction of oil prices for a second time last week, according to US Commodity Futures Trading Commission data.

Speculative short positions, or bets prices will fall, outnumbered long positions by 11,285 contracts on the New York Mercantile Exchange on May 5, the commission said May 8. A week earlier, traders had bet on rising prices.

New York oil futures plunged to a four-year low of $32.40 on December 19 as global recession slashed demand and producers cut production to slow rising stockpiles. Prices have gained 39 per cent in the past two months as measures to restore global credit markets lifted global equity markets.

The Organization of Petroleum Exporting Countries will review its output levels on May 28. Iran, the group’s second-largest member, will seek a price of $70 a barrel, the nation’s oil ministry said May 9, citing OPEC governor, Mohammad Ali Khatibi.

“I don’t believe OPEC is going to cut again, especially with what’s happened to prices the last couple of weeks,” Commodity Warrants’ Hassall said.

China Petroleum & Chemical Corp., Kuwait Petroleum Corp. and an overseas oil producer plan to build a $9 billion refining and petrochemical plant in southern China’s Guangdong province, according to the head of China’s energy authority.

The third company is either BP Plc or Royal Dutch Shell Plc, Zhang Guobao, head of China’s National Energy Administration, said in Beijing yesterday. Zhang spoke to reporters in Beijing after the Chinese and Kuwaiti governments signed trade accords.

The project’s location may be moved to Zhanjiang from an earlier plan of Guangzhou, Zhang said, adding that talks between the companies are still continuing. The plant will include an oil refinery and an ethylene plant, he said.

China Petroleum, also known as Sinopec, will have the “biggest” stake in the project, Huang Wensheng, Beijing-based spokesman for the company, said by telephone on Monday.