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Price of oil eases off record highs

(AFP) / 16 October 2004

LONDON - World oil prices eased slightly yesterday but remained close to record high points near 55 dollars a barrel as traders fretted about low inventories of US heating fuel heading into the northern winter.

The price of reference light sweet crude for delivery in November fell 16 cents to 54.60 dollars a barrel in early trading on the New York Mercantile Exchange.

New York’s main oil contract soared to an all-time intra-day high of 54.88 dollars a barrel Thursday, closing at a record 54.76 dollars.

In London, Brent North Sea crude oil for December delivery lost 24 cents to 49.85 dollars in late deals on Friday. The contract for November, which expired Thursday, hit a record 51.50 dollars a barrel earlier in the week.

Suspension of a general strike in major crude producer Nigeria helped to cool prices a little, traders said.

“The Nigerian strike has been suspended but we are looking for prices to stay strong,” GNI-Man Financial trader Lee Elliott said.

“It should be a relief as people were a little bit worried about the strike, but you never know how quickly things could change over there.”

Nigeria’s unions suspended their four-day general strike on Thursday and gave President Olusegun Obasanjo’s government two weeks to find a way to cut rising fuel prices.

International markets had been watching the strike closely, concerned that if Nigeria’s daily exports of around 2.5 million barrels per day were disrupted oil prices could rocket. Although exports were unaffected, oil workers’ leaders warned that they were holding the threat of a halt to exports as an option in case of harassment by the authorities.

New York’s oil price had raced to a record high Thursday as news of a decline in US heating oil inventories rattled traders with colder weather approaching.

“The market fears that the US is running out of time to build winter fuel supplies, which are also short in Europe and Asia,” analysts at the Sucden brokerage firm said.

Inventories of distillates — mostly diesel and heating oil — dropped 2.5 million barrels to 120.9 million in the week to October 8, the US Energy Department said, showing the effect of production and refinery problems in the Gulf of Mexico caused by recent hurricanes.

Heating oil inventories, in high demand in the northern hemisphere winter, declined 1.2 million barrels to 50.0 million. Diesel fell 2.1 million barrels to 68.2 million.

“Distillate stocks (at) 8.1-per cent lower than last year feed fears of heating oil shortages this winter,” Societe Generale analyst Deborah White said in Paris.

High oil prices should have a more muted impact on US economic growth and inflation than the 1970s oil shock, Federal Reserve chairman Alan Greenspan said.

But the harm could intensify if oil prices moved “materially higher,” he warned.

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