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Last Updated: Wednesday, 26 May, 2004, 22:53 GMT 23:53 UK
Oil prices hit by mixed US data
An oil flare from an oil well
Markets are keenly monitoring US stockpiles of oil
Oil prices fell after two surveys gave conflicting reports on the level of US crude oil and petrol stocks.

Prices briefly rose after the US government said crude oil stockpiles were unchanged last week, while stocks of petrol fell by 700,000 barrels.

However, a separate industry survey said shortly afterwards that crude and petrol stocks had both risen.

The news, ahead of the key US driving season, pushed US light, sweet crude down 44 cents to $40.80 a barrel.

In London, the price of a barrel of Brent North Sea crude oil, for July delivery, fell 36 cents to $37.08.

Contrary data

Crude oil on sale in New York hit a record high on Monday of $41.72 a barrel, dipped back on profit-taking on Tuesday to $41.14, then briefly touched $41.40 in overnight trade in Asia on Wednesday.

Data from the US Energy Information Administration (EIA) showed that crude oil stocks in the week ended 21 May were unchanged from the previous week, at 298.9 million barrels.

The EIA also said that petrol stocks, which are keenly watched ahead of the traditional driving season, fell to 203 million barrels.

However, figures from the American Petroleum Institute (API) contradicted this data, showing inventories of crude oil in the same period rose by 764,000 barrels to 299.9 million.

The API said that US stocks of petrol also rose, by 1.6 million barrels to 197.9 million.

Temporary shortages

Leaders of the world's major economies fear a setback to global growth if oil prices remain doggedly close to record levels, and have appealed to the Opec oil producers' cartel to boost output.

Oil workers in Baghdad
Iraq's oil supply keeps getting disrupted

Temporary shortages in the US have played a strong role in driving recent price rises.

EU energy commissioner Loyola de Palacio said on Wednesday there is no deep-seated problem with the world oil market.

"What we have here is a speculative bubble...There is no real shortage on the markets. That is the reality," said Ms de Palacio.

She said crude oil prices ought to be based on a basket of currencies of major oil consuming countries rather than solely on the dollar. The weaker US currency has contributed to the higher nominal price of oil.

Oil traders remain divided about the likely impact of Saudi Arabia's promise to pump an extra 800,000 barrels a day on world oil supplies, and whether it can persuade the other members of the Opec oil producers cartel to follow suit.

Traders also point out that it could take until August before extra Saudi output cools the market.

Opec divisions

So far, Saudi Arabia's promise last weekend appears to have had little impact on runaway prices, which many observers believe are the result of soaring demand and security fears, rather than producers' intransigence.

In reality, Saudi Arabia is the only one of Opec's 11 members - who between them produce a third of the world's oil - with much headroom for extra output.

Opec members and the world's other producers are generally judged to be pumping oil at a rate not far off their maximum capacity.

Some Opec oil producers, such as Nigeria, have argued the cartel is being unfairly blamed for high oil prices as they are already pumping flat out.

US energy secretary Spencer Abraham appeared to support this view on Wednesday, saying: "We're producing a substantial amount more oil in the world today than we did a year ago."

"Inventories are substantially higher than they were a year ago," he added.

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