LONDON – Oil prices ended down slightly on Friday after surging $3 in two days on concerns about low winter supplies ahead and fears that global oil flows could tighten again.
Exports from Russia, the world's second largest oil exporter, could be hit as oil giant YUKOS said it might stop operations after a Moscow court froze its bank accounts. This followed hints earlier this week from Saudi Arabia and Nigeria that the Organization of the Petroleum Exporting Countries (search) (OPEC) might not raise output quotas further, bumping up prices.
U.S. light crude dipped 35 cents to $38.39 a barrel on the New York Mercantile Exchange (search), after rising $3.08 in the previous two days. Friday's U.S. crude price was 46 cents higher than a week ago.
The U.S. market will close for Independence Day on Monday.
London Brent fell 15 cents to $35.92 a barrel, after gaining $2.96 in the previous two days.
"The market had an over-sized move (in the last two days) because of exaggerated fund activity," said Edward Meir of Man Energy.
The re-emergence of fund speculators, who were piling into European gas
oil and U.S. heating oil, put a brake on a month-long dive that took oil prices down about $6, or 15 percent, from 21-year highs of $42.45 on June 2.
YUKOS (search) warned that it may have to cut oil production as soon as next week. In June, YUKOS crude production was 1.7 million bpd, about 20 percent of Russia's crude production of about 9.3 million barrels daily.
Traders said a less-than-expected rise in U.S. distillate stocks * which includes heating oil and diesel fuel -- of 500,000 barrels last week, versus forecasts for a 1.5 million-barrel build, also stirred fears of undersupply. United States refiners have been producing gasoline at a breakneck pace to stockpile for the peak summer demand season, letting heating oil production lag.
These worries have created a "general doubt premium" in the markets, said Tom James, of Tokyo Mitsubishi in London, although the slight fall on Friday made sense given the violent spikes of the previous days.
Nigeria's top oil official said on Thursday he wanted oil prices to stay in the mid-$30s and cautioned OPEC producers about releasing too much supply at current prices.
Added to this, Saudi Oil Minister Ali al-Naimi said earlier that current prices were fair and the decision on whether OPEC should boost output another 500,000 barrels per day (bpd) from August 1 would have to wait for a scheduled meeting on July 21.
OPEC's official production ceiling stands at 25.5 million bpd after the first step of its two-stage increase became effective on Thursday, adding two million bpd to the limits.
"Two things helped oil prices. Firstly, potential terrorist attacks continue to worry the market. With a long weekend ahead in the U.S., many were unkeen to stay short," said David Thurtell, commodity strategist with Commonwealth Bank of Australia.
"Secondly, YUKOS said it might have to halt production as tax authorities have frozen their bank accounts."
YUKOS was slapped with another huge tax bill on Thursday after it warned it could be bankrupted by $3.4 billion in back taxes it already has to pay within five days. On Friday, a Moscow court rejected an appeal by YUKOS that the freeze be lifted, sending its shares crashing.