Oil prices surge to $62 pb

Oil prices moved back to near USD62pb after a reported steep 3.3 mln barrel fall of US oil inventories and after new attacks on foreign oil facilities in Nigeria. The market was looking for an increase of oil inventories. Bear in mind that the equity market rally and the recent rebound in consumer confidence have been supported by falling oil prices. Rising oil prices may spark a reverse reaction on asset markets and consumer confidence, putting the USD under pressure.

The drop in inventories comes at a time when Opec members are poised to cut output in an effort to stabilise prices. Market uncertainty was heightened by attacks on three Shell oil platforms in the Niger Delta, which forced production to be curtailed.

The cost of a barrel of oil had fallen 20% to below $60 in recent days since hitting a peak of $78 in July.

But prices have picked up after Saudi Arabia and Abu Dhabi confirmed they would proceed with quota cuts agreed at a recent Opec meeting, and Iran indicated that it would soon follow suit.

The three countries pledged to cut output by more than 650,000 barrels a day.

Analysts said they were not sure whether the drop in US inventories was due to lower output from Opec or lower demand from US refiners.