Oil Trades Near Record on OPEC Output, Drop in U.S. Inventories

By Yuji Okada and Sophie Tan

March 06, Bloomberg

Crude oil traded near a record $104.95 a barrel in New York after surging on OPEC's decision to leave production unchanged, lower U.S. fuel inventories and as Venezuela moved tanks toward its border with Colombia.

The Organization of Petroleum Exporting Countries agreed to maintain output targets at a meeting yesterday in Vienna. U.S. inventories fell for the first time in eight weeks, the Energy Department said. Venezuela activated the country's navy and air force in addition to mobilizing 10 tank battalions.

``Those factors encouraged buying here in Asia, extending what we saw in the U.S.,'' said Tetsu Emori, a fund manager at Astmax Ltd. in Tokyo. ``The drop in U.S. inventories, which generated panic-like buying, was a surprise. Crude oil, which has not seen the gains recorded by core commodities, suddenly emerged center stage. If crude rises above $105, the next target will be $150'' a barrel, he said.

Crude oil for April delivery was at $104.60 a barrel, up 8 cents, in after hours electronic trading on the New York Mercantile Exchange at 9:16 a.m. in Singapore.

Oil rose $5 to settle at $104.52 a barrel yesterday, a record close and the biggest one-day increase since Jan. 30, 2007. Futures earlier touched the highest since trading began in 1983.

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photo: Traders walk outside the crude oil options pit at the New York Mercantile Exchange prior moments before the start of trading in New York on March 5, 2008 (Photographer: Daniel Acker/Bloomberg News)