Oil Falls on Signs of Increased OPEC Output, Inventory Growth

April 26 (Bloomberg) -- Crude oil fell for a second day in New York on speculation that production will rise after Saudi Crown Prince Abdullah and President George W. Bush discussed oil policy at a meeting yesterday.

OPEC daily output of crude oil rose by 700,000 barrels to 30.4 million this month, the majority coming from Saudi Arabia, according to estimates by PetroLogistics Ltd. A government report tomorrow is expected to show that U.S. crude-oil inventories rose for the 10th week in 11.
``The meeting between Abdullah and Bush has had a psychological effect on the market,'' said Jim Steel, director of commodity research at Refco Inc. in New York. ``The message that came out of the meeting was that OPEC, and in particular the Saudis, will increase production and keep us well supplied.''

Crude oil for June delivery fell 42 cents, or 0.8 percent, to $54.15 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. Futures reached $58.28 on April 4, the highest since the contract began in 1983. Prices are up 46 percent from a year ago.
In London, the June Brent crude-oil futures contract fell 28 cents, or 0.5 percent, to $54.12 a barrel on the International Petroleum Exchange. Brent futures are down 6.1 percent from the record $57.65 a barrel reached on April 4.

``We believe that supplies, as we speak, are adequate,'' Prince Abdullah's foreign policy adviser, Adel al-Jubeir, told reporters yesterday after the meeting at the Bush ranch in Crawford, Texas. ``Saudi Arabia has some spare capacity that it can produce,'' he said.

Saudi Arabia hasn't been asked for more oil because output is sufficient, al-Jubeir said. Production will meet demand in the fourth quarter, Qatari Oil Minister Abdullah bin Hamad al-Attiyah said in Port-of-Spain, Trinidad and Tobago.

`Met by Skepticism'
``The meeting was met by skepticism by my customers,'' said Aaron Kildow, a broker at Prudential Financial Derivatives, LLC in New York. ``It looked like the Saudis were blowing smoke but one can't deny they have raised output recently. It looks like a lot of the increased OPEC output will be headed our way because of refinery maintenance in Japan and elsewhere in Asia.''

The 11-nation Organization of Petroleum Exporting Countries boosted production from a revised 29.7 million barrels a day for March, Conrad Gerber, the president of Geneva-based PetroLogistics, which assesses supply by tracking tankers, said in a telephone interview today.
Output in Saudi Arabia, OPEC's largest producer, probably rose to 9.6 million barrels a day this month from a revised 9.05 million a day for March, he estimated.
`Oversupplied'
The global oil market is well supplied and may ``even be oversupplied,'' Bijan Namdar Zanganeh, Iran's oil minister, said at a conference of natural-gas exporting countries in Port-of- Spain, the capital of Trinidad and Tobago. Iran hasn't decided on a position for OPEC's June 15 meeting in Vienna.

``The market should not expect everything to be done by OPEC because everything is not in the hands of OPEC,'' he said. ``There are many players that are acting in the market.''
Zanganeh said he was concerned that high prices might slow economic growth.

Germany's six leading economic institutes cut their forecast for growth this year in half as high oil prices crimped consumers' spending power and unemployment rose to a post-World War II high. Germany's economy will grow 0.7 percent in 2005, the institutes said, slashing their October forecast of 1.5 percent. Germany is the fourth-largest oil consumer.

Surging Profits
BP Plc, the world's second-largest publicly traded oil company, posted a 29 percent jump in first-quarter profit to a record because of higher energy prices. Net income rose to $5.49 billion, or 25.6 cents a share, from $4.26 billion, or 19.3 cents, in the year-earlier period, excluding gains in the value of its oil inventories.

London-based BP is the first of the world's largest oil companies to report earnings for the period, when New York crude oil averaged $50.03 a barrel. Chief Executive John Browne in an interview said economic growth is ``pretty good'' around the world, with few signs of a slowdown in demand.

U.S. crude oil stockpiles probably rose 650,000 barrels last week from 318.9 million barrels the previous week, according to the median of forecasts by 14 analysts before the Energy Department report. Eight analysts expected an increase and six a decline. Supplies in the week ended April 15 were 4.8 percent higher than the five-year average for the week.
Gasoline Inventories

Gasoline stockpiles probably fell 1 million barrels last week, according to the median forecast. The department will release its report on inventories tomorrow at 10:30 a.m.
Gasoline for May delivery fell 2.4 cents, or 1.5 percent, to $1.627 a gallon in New York. Futures have declined 7 percent since touching a record $1.749 on April 4. Prices are 38 percent higher than a year ago.

Pump prices for regular grade gasoline rose 0.1 cent to an average $2.219 a gallon yesterday, according to the AAA, formerly the American Automobile Association. Prices touched a record $2.276 a gallon on April 8 and are 23 percent higher than a year ago.