OPEC's new cut promotes Oil Prices

December 16, 2006 -- Following a decision to cut down the oil production by the Organization of Petroleum Exporting Countries (OPEC), a source of more than one-third oil of the world, in the United States on Friday, the oil prices soar to above US$63 per barrel.

Later, OPEC decided against the decision and announced that it would maintain the production levels till next February. This decision has not much impact on the increased oil prices, and they remain at US$63.32 per barrel.

Even the Brent crude for February saw an increase of US$0.60, and is selling at US$63.40 a barrel at ICE Future Exchange, London.

Due to dense fog, the arrival of the crude oil shipments to refineries along the US Gulf Coast delayed favored OPEC's decision to cut down on oil production.

"The OPEC cut is there, and the ship channel fog supports things a bit," said John Kilduff, senior vice president for the Energy Risk Management Group at Fimat USA.

"If there were no oil deliveries for two days, we would be concerned," said David McKinney, a spokesman for Shell Oil which operates a joint venture refinery near Houston.

The decision of OPEC did not influence the price of the crude completely said the Saudi Oil Minister Ali Naimi.

"What we're working toward is to rebalance the market and this decision does this," he said.

OPEC, in its official statement said that it expects the growth of more than 1.8 million barrels per day in 2007 from non-OPEC supplies, and 1.3 million barrels more than anticipated global demand.

The increase in oil prices boosted when few gunmen attacked the oil industry at Nigeria, the fifth largest supplier of oil, shot a man, took with them three Nigerian hostages forcing the temporary halt in the production.

Oil price increase boosted further with the Gulf coast oil refineries shut on Friday as unloading was prevented by dense fog.