Crude Oil Steadies After Sell-Off

Oil prices steadied on Friday to slow this week's 5 percent sell-off as an expected increase in world demand later this year countered a near-term glut in U.S. crude inventories.

OPEC's president said Friday the cartel saw no need to slow down its soaring production levels, despite recent declines in oil prices and rising stocks in consumer countries, because the market will need the extra oil in the fourth quarter.

U.S. light sweet crude (search) ended down 12 cents $46.92 a barrel after trading at its lowest since mid-February. London Brent rose 15 cents to $48.03.

U.S. crude prices are down about 5 percent this week, and roughly 20 percent below the peak hit in early April, as a flood of imports boosted U.S. commercial inventories to their highest in six years.

OPEC President Sheikh Ahmad al-Fahd al-Sabah said on Friday that demand growth forecasts indicated OPEC would not need to trim output at its meeting next month.

"Until now we see no reason to cut," he said. "There is no need to trim, we will continue at this level."

The Organization of Petroleum Exporting Countries (search) is producing about 30.5 million barrels per day of oil, Sheikh Ahmad said, near a 25-year high.

OPEC is sustaining high output to help stocks build ahead of an expected surge in demand when colder weather returns to the Northern Hemisphere, boosting heating demand.

Sheikh Ahmad said that OPEC would be content to allow oil prices to fall into the $40-$45 range.

Speculators have bought into oil in a bet that global supply chains will tighten toward the end of the year.

Sheikh Ahmad said inventories in OECD countries stood at 53.8 days of demand, and that OPEC would be comfortable with a growth in inventories to 55 days.

"Even if U.S. crude stocks are high, they can't refine everything," said Noboru Kamakura, general manager of risk management at Mitsubishi Corp.

Prices were also bolstered by a strike at Total's refineries in France over the elimination of a public holiday.

The oil major has been forced to shut down two plants this week, and is in the process of shutting down three more.

Federal Reserve Chairman Alan Greenspan (search) said on Friday that world oil inventories would continue rising unless demand growth picks up.

Speaking to the Economic Club of New York, Greenspan pointed out that he had said in April when prices were spiking that he expected to see "an inventory buffer to damp the price frenzy."

Sustained high energy prices have fueled concern about an oil-led slowdown in world economic growth.