* EIA data expected to show drop in U.S. crude inventories
* OPEC decides to keep output unchanged
* Secretary General says market oversupplied
(Updates prices)
By Chris Baldwin
LONDON, May 28 (Reuters) - Oil held above $63 on Thursday
after OPEC ministers meeting in Vienna decided, as widely
anticipated, to leave the group's crude output unchanged at
24.85 million barrels per day.
U.S. crude oil for July delivery <CLc1> was up 45 cents at
$63.90 a barrel by 1404 GMT after having briefly touched $64.19,
its highest level since mid-November.
London Brent crude <LCOc1> rose 64 cents to $63.14.
Oil has climbed back from a low of $32.40 last December to a
six-month high above $63 on Wednesday, and 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.
On Thursday Naimi told reporters that OPEC had decided to
keep its output target unchanged.
"Stay the course, that's the decision," Naimi said at the
end on an almost two-hour meeting of the Organization of the
Petroleum Exporting Countries. []
Analysts said the decision to leave output unchanged was
expected and had been thoroughly priced in to the market
beforehand
"This decision is going to be fairly market-neutral in the
short run -- it's what the market was expecting," said Andrey
Kryuchenkov, analyst at VTB Capital in London.
"In the long-run, if they can stick to 80-85 percent
compliance, it will be market supportive as inventories will
start to come down -- as long as demand doesn't deteriorate
further."
YIELD SPIKE
European shares were lower on Thursday, tracking a decline
on Wall Street, after a spike in Treasury yields triggered a
sell off in equity markets.[]
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." []
Data on Thursday showed the pace of economic decline in
western Europe is slowing, with the Business Climate Indicator
(BCI) rising to -3.17 points from an upwardly revised -3.26 in
April, its first improvement over two straight months since May
2008. []
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."
OPEC Secretary General Abdullah al-Badri said the oil market
was still oversupplied, with around 130 million barrels of crude
and refined products currently stowed in floating storage.
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 Commodities broker
Christopher Bellew said.
A Reuters poll of 11 analysts showed U.S. crude inventories
likely fell around 700,000 barrels last week. [] The U.S.
Energy Information Administration will release its
holiday-delayed weekly report on Thursday at 1500 GMT.
(Editing by Anthony Barker)
