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Oil price falls below US$90

(LONDON) The price of oil fell back below US$90 yesterday as the market speculated about the chances of an increase in Opec output at the cartel’s meeting next week, dealers said.

They said prices also fell after it appeared more likely that an explosion on a key pipeline from Canada into the United States would have only a limited impact on supply.

Yesterday, New York’s main contract, light sweet crude for January delivery, was down US$1.75 to US $89.35 per barrel, after earlier striking a one-month low of US$88.52. Brent North Sea crude for January tumbled US$1.32 to US$88.93.

The Organization of the Petroleum Exporting Countries (Opec) meets in Abu Dhabi on Wednesday with many participants expecting the group to boost output to help counter record- breaking prices.

‘All eyes will be on Opec now ahead of the group’s meeting on Dec 5,’ said Nimit Khamar, analyst at the Sucden brokerage here. ‘Many expect the group to hike supplies in order to cool off prices.’

The oil producers’ group is a key player in the energy market because it produces about 40 per cent of the world’s crude.

Opec last decided to raise production in September when it agreed to provide an extra 500,000 barrels a day to the market from Nov 1. ‘The forthcoming Opec conference now looms large over the oil market,’ the Commonwealth Bank of Australia (CBA) said in a report to clients.

‘It appears that oil markets are considering the possibility that there will be an increase in Opec production ceilings of at least 0.5 million barrels per day.’

Earlier this week, Saudi Oil Minister Ali Al-Nuaimi said the market was well supplied and that high prices did not properly reflect supply and demand. Asked whether Saudi Arabia, the world’s biggest oil exporter, would push for an increase in production at next Wednesday’s meeting, Mr Nuaimi said the cartel would first need to see market data.

Since striking record peaks just under US$100 last week, prices have slumped by about US$10 in New York and almost US$8 here.

 

Source: AFP (Business Times 1 Dec 07)

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