Oil: Steady as Opec sees no need to cut output

Oil prices were steady on Friday, paying little heed to an Opec pledge to keep output at full tilt as a strike choked refinery operations in France.

US light sweet crude fell 2 cents to $46.90 a barrel, trading close to its lowest levels since mid-February. London Brent rose 31 cents to $48.19.

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 Organisation of Petroleum Exporting Countries is producing about 30.5 million barrels per day of oil, Sheikh Ahmad said. That would put production near a 25-year high.

Opec is sustaining high output to help stocks build ahead of an expected surge in demand in the fourth quarter.

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.

US commercial crude oil stocks are at their highest level for six years. Stocks have risen for 12 of the last 13 weeks, helping to wipe $11 from US prices since early April.

But markets drew support from concern that global oil product inventories will be insufficient to meet the annual peak in Northern hemisphere demand during the winter months.

Economic growth is fuelling an increase in demand for diesel. Refiners could struggle to meet strong demand for heating oil and for diesel, as both products come from the distillate pool.

Distillate stocks in the US fell last week, dashing analysts' expectations that stocks would build.

"Even if US 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 suppression 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.

Traders will be eager to see what Federal Reserve Chairman Alan Greenspan has to say about energy when he addresses a lunch in New York at 1630 GMT.

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

- REUTERS