Reply #2: UPDATE 1-Oil holds near $41, supply fears remain

[54anickel]

http://www.fxstreet.com/nou/noticies/afx/noticia.asp?font=Reuters&pv_noticia=MTFH21074_2004-07-19_10-51-16_L1949067

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"Oil prices are still strong because demand is strong, capacity utilisation is high, and we've still got concerns over security of supply," said Commerzbank analyst Steve Turner.

With world spare capacity at its lowest level for more than a decade, fears of supply disruption have kept prices well over $35 a barrel for most of the year. Oil hit its highest levels in six weeks on Friday when speculative hedge funds bought futures in a bet that prices would rise further.

Commerzbank's Turner said confirmation last week by the Organisation of the Petroleum Exporting Countries (OPEC) that they will lift official output levels from August 1 by 500,000 barrels per day (bpd) would have little effect on supply.

"Most OPEC members that are not constrained by capacity are already over-producing their August 1 quotas, so this will have very little impact on physical supply," Turner said.

The producers' cartel OPEC, which controls 50 percent of global crude exports, is thought to be pumping at its highest levels since December 1979.