BIKE: Qatar "Spare capacity will be smaller ...until there is no more oil."

[alan_drake]

Oil Prices Up on Speculation About Demand
Tuesday May 10, 10:17 am ET
By George Jahn, Associated Press Writer
Crude Futures Climb on Speculation That Demand Will Outstrip Supply

VIENNA, Austria (AP) -- Crude futures climbed Tuesday on speculation that demand will outstrip supply, as a major OPEC producer said the cartel may not be able to pump enough oil to meet needs for the remainder of 2005.

Light sweet crude for June delivery rose 19 cents to $52.22 a barrel on the New York Mercantile Exchange by afternoon in Europe.

Unleaded gas was up by more than a cent to $1.4993 a gallon (3.8 liters). Heating oil rose by nearly a penny to $1.4472 a gallon.

In London, Brent crude prices rose 36 cents on the International Petroleum Exchange, to reach $51.65 a barrel.

Prices were given an upward nudge after Qatar's oil minister, Abdullah Hamad al-Attiyah, raised concerns over the Organization of Petroleum Exporting Countries' capacity to deal with demand for the next Northern Hemisphere winter, when global consumption peaks.

"OPEC is at its highest production in history. I am concerned about that. If we reach the full capacity now, we will tighten in the fourth quarter," Dow Jones Newswires quoted al-Attiyah as saying. "The spare capacity will be smaller and smaller, reaching a plateau when there is no more oil."

OPEC pumps around 40 percent of world oil and raised production to about 30 million barrels daily this year in an effort to boost stocks and steady prices ahead of summer. The increased production has some analysts concerned that OPEC is pumping at full tilt, with no spare capacity in the event of an unscheduled outage or a sudden rise in global demand.

PVM Oil Associates in Vienna estimated May crude output from OPEC -- including Iraq -- would average 30.09 million barrels a day.

On Wednesday, the U.S. Department of Energy releases its weekly petroleum inventory report, while the Paris-based International Energy Agency issues its monthly oil data that forecasts global demand.

PVM estimated the U.S. data would show a 1.5 million-barrel crude stock build in U.S. inventories for the week ended May 6. Gasoline stocks likely rose by around 1 million barrels due to higher than expected refinery runs and "strong imports from Europe," it said.

But even increased stocks might not brake market sentiment.

Last week traders shrugged off a bearish report from the Department of Energy, sending prices upward on concern over U.S. refineries' ability to boost output ahead of the U.S. summer driving season while also looking toward its heating oil production for winter.

The United States is the world's largest consumer of crude oil.

Victor Shum, oil analyst at Texas-based energy consultants Purvin & Gertz said that "$50 prices are really supported by the view that we better keep buying because in the second half of the year, demand will be tight."

PVM chief analyst Ehsan Ul-Haq said at present the market was being driven in part by inadequate refining capacity.

"Almost all over the world people are looking for gas and diesel with less and less sulfur, and many refiners, particularly in Asia, are not able to make these quality changes," he said.

While lack of storage space in the well-stocked Western hemisphere is starting to be a problem, there is continuing, though weakened, demand growth in Asia -- 4 percent more in South Korea alone last quarter compared to the same time last year, he said.

Reflecting lack of refining capacity and Asia's energy hunger -- due in part to price-suppressing government subsidies -- the PVM energy market report said oil-rich Iran had to import around 6.47 million gallons in April.

Associated Press Writer En-Lai Yeoh contributed to this report from Singapore.