MW: Oil edges down as OPEC reportedly keeps output steady
Investors are awaiting data that's expected to show a decline in crude supplies
By Polya Lesova, MarketWatch
FRANKFURT (MarketWatch) -- Oil futures fell on Tuesday, as members of the Organization of the Petroleum Exporting Countries reportedly agreed to leave output quotas unchanged at their meeting in Angola.
Crude oil for February delivery, the new front-month contract, dropped 31 cents, or 0.4%, to $73.41 a barrel in electronic trading on Globex.
Earlier, the contract had risen to an intraday high of $74.02 a barrel.
In Angola's capital Luanda, members of the OPEC oil cartel decided to make no changes to current production quotas, according to media reports on Tuesday citing various officials. The decision was in line with market expectations.
"Despite support from cold weather in the U.S. and Europe, and signs that U.S. demand is beginning to recover, crude oil will face sustained headwinds if it pushes past $80 per barrel again," said Greg Priddy, global oil analyst at Eurasia Group.
Saudi Arabia's desire to restrain price increases to around $75 a barrel should be taken seriously, he wrote in a note to clients.
Saudi Arabia, OPEC's largest oil producer, is seen as the most influential member of the cartel. It's the world's second biggest oil producer after Russia, which is not a member of the cartel.
"With most OPEC members at least slightly above their production targets, and no real consensus within the cartel about the desired price level, Saudi Arabia will be in the position of trying to manage the market into 2010 with modest adjustments to its own output, perhaps in coordination with Abu Dhabi and Kuwait," Priddy said.
Supply data ahead
Traders are also awaiting the latest data on U.S. petroleum inventories.
The American Petroleum Institute will release its report at 4:30 p.m. Eastern on Tuesday. The Energy Information Administration will announce its more closely watched data at 10:30 a.m. on Wednesday.
Analysts polled by Platts expect a decline of 2 million barrels in commercial crude stocks for the week ended Dec. 18. They also project an increase of 1.3 million barrels in gasoline inventories and a decline of 2.25 million barrels in distillate stocks.
"The projected decline in U.S. commercial crude stocks is in line with seasonal tendencies as refiners run down inventories due to end-of-year tax considerations," said Linda Rafield, Platts senior oil analyst.
"Not unusually, tankers are kept out at sea until the beginning of the new year, keeping import levels at low levels," she said in a note.
Oil futures fell on Monday, as the U.S. dollar rose on expectations that several reports this week will show the American economy remains on the recovery track.
