Oil Prices Hover Near $50 Per Barrel Mark

Monday, April 18th 2005, 10:06 am

By: News On 6

SINGAPORE (AP) _ Crude prices fell again Monday, hovering near the $50 per barrel threshold amid calls by world leaders for immediate action to reduce the cost of oil and another OPEC promise to increase production.

The president of the Organization of Petroleum Exporting Countries said Monday that the group's members will raise their output by 500,000 barrels a day in May in response to rising demand, and without an official decision.

Sheik Ahmed Fahd al-Ahmed al-Sabah, who is also Kuwait's energy minister, had previously spoken of the increase next month, but it was the first time he said it was going to be without a decision taken at an OPEC meeting.

The group wanted to ``guarantee the flow of oil to markets,'' and the increase will be ``spontaneously carried out by members without a decision,'' he added.

Finance officials from the Group of Seven had said in a communique after their meeting in Washington D.C. over the weekend that ``higher oil prices are a headwind,'' and urged producers to increase energy supplies and said countries should conserve more.

The Group of Seven _ the United States, Japan, Germany, France, Britain, Italy and Canada _ also endorsed more timely and accurate information about the oil market, which officials said could help control price fluctuations and make companies more willing to expand production.

Light, sweet crude for May delivery fell 83 cents to $49.66 per barrel before recovering to $50.32 in electronic trading on the New York Mercantile Exchange. Prices declined more than 5 percent last week, just days after hitting an all-time intraday high above $58 on April 4.

Heating oil fell nearly 2 cents to $1.4410 per gallon while unleaded gas futures dropped more than a cent to $1.4712 per gallon.

Brent crude for June fell 76 cents to $50.85 on London's International Petroleum Exchange.

Prices have fallen recently on increased stockpile reports from the United States, and OPEC's willingness to raise production. Also factoring into the decline was a fresh report from the Paris-based International Energy Agency forecasting slower demand growth in 2005.

Al-Sabah said current crude prices were ``almost'' fair and ``it looked like the market is well supplied.'' He did not say what he regarded as a fair price.

At a March meeting in Iran, the group increased its production ceiling by 500,000 to 27.5 million barrels a day, and provided for an identical increase if crude prices did not stabilize. Al-Sabah said the expected increase in May was not that second hike, but was a separate OPEC reaction to the expected high demand for oil in the third quarter.

Oil prices remain about 30 percent higher than a year ago, a catalyst for the G-7 warnings as nations begin to lower growth forecasts for 2005.

``These energy prices are too high. ... They call out for action,'' U.S. Treasury Secretary John Snow said.

Traders have been hesitant to declare that oil prices have peaked for the year, though they say supply increases and signs of shrinking demand growth could keep downward pressure on the market for the rest of the quarter.

``Over the last few days, the demand side of the market has been a talking point,'' said ANZ Bank energy analyst Daniel Hynes from Melbourne, Australia. ``The weekly U.S. petroleum stocks report will something to watch for, with gasoline stocks now having a bigger effect on prices as we approach the summer driving season.''

Average pump prices in the United States are around $2.28 per gallon compared to under $1.80 a year ago. Last week, U.S. President George W. Bush blamed China's growing appetite for crude for higher domestic prices.