Oil holds above $63 as OPEC keeps output unchanged

OIL TURMOIL: On Thursday Naimi told reporters that OPEC had decided to keep its output target unchanged.(Getty Images)

Oil held above $63 on Thursday after OPEC ministers meeting in Vienna decided to leave the group's oil output untouched at 24.85 million barrels per day.

US crude oil for July delivery was up five cents at $63.50 a barrel by 02.33pm UAE time. The contract settled $1.00 higher at $63.45 on Wednesday, after having touched $63.82, its highest level since mid-November.

London Brent crude rose 10 cents to $62.60.

Oil has climbed back from a low of $32.40 last December to a six-month high above $63 on Wednesday, after Saudi Arabia's Oil Minister Ali Al Naimi told reporters in Vienna the world was ready to cope with a barrel price range of $75-$80.

"The price rise is a function of optimism better things are coming in the future," Naimi told reporters.

On Thursday Naimi told reporters that OPEC had decided to keep its output target unchanged.

"Stay the course, that's the decision," Naimi told reporters at the end on an almost two-hour meeting of the Organization of the Petroleum Exporting Countries.

Concerns about the debt burden facing countries trying to spend their way out of the economic downturn scared investors on Thursday in spite of optimism from President Barack Obama that the U.S. economy was past the worst.

"It's safe to say we have stepped back from the brink," Obama told a fundraiser in Beverly Hills. "There is some calm that didn't exist before."

European shares opened lower on Thursday, tracking a decline on Wall Street, after a spike in Treasury yields triggered a sell off in equity markets.

Analysts said oil's recent highs have followed resurgent global equity markets in spite of weak underlying fundamentals of excess supply and poor demand for refined petroleum products.

"In the near term, oil will likely retain its high level of correlation in daily return with equities, but equally with (foreign exchange) as long as oil is kept off the market in storage," said BNP Paribas' senior oil analyst Harry Tchilinguirian.

"When that oil starts coming back, depressing the prompt, we can expect that relation to loosen."

Industry officials and analysts estimate a range of 100 million to 130 million barrels of crude oil stored at sea in 50 to 53 vessels, as sellers profit on oil for prompt delivery being cheaper than for future delivery.

The American Petroleum Institute said in its report after oil markets closed on Wednesday that crude stocks fell 2.8 million barrels to 364.7 million barrels last week.

"I think the stark draw in the APIs during the night has stopped oil from going lower," Bache Commoditiews broker Christopher Bellew said.

A Reuters poll of 11 analysts showed US crude inventories likely fell around 700,000 barrels last week. The US Energy Information Administration will release its holiday-delayed weekly report on Thursday at 07pm UAE time. (Reuters)

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