Oil Price Slips as Dealers See OPEC Oil Increase Looming
(AFP, LONDON, July 19) - Crude oil prices fell back on Wednesday as dealers braced for an upturn in supply from OPEC producers.
In London, the price of benchmark Brent crude for September delivery fell by 42 cents to 28.90 dollars a barrel in late afternoon trading.
In New York, light sweet crude for August delivery fell by four cents to 31.90 dollars a barrel in early trading there. Prices had risen by 1.11 dollars on Tuesday.
The fall in prices came as dealers braced for increased oil supplies from OPEC countries, notably the kingpin producer, Saudi Arabia.
"The markets are getting more confident that Saudi Arabia is putting more oil on the market," said oil analyst Lawrence Eagles an at GNI brokerage.
In addition, Algeria announced that it would increase production by 16,000 barrels per day from July 29.
Algerian energy minister Chakib Khelil said that the increase followed a decision by OPEC on July 17 to increase output by 500,000 barrels per day if prices remained at current highs.
Prices fell earlier this week after the Organisation of Petroleum Exporting Countries (OPEC) announced that its president Ali Rodriguez had asked member states to prepare for an increase of 500,000 barrels a day by the end of this month if prices, which have exceeded 30 dollars a day in recent weeks, did not fall.
Analysts had expected the increase to be triggered by a mechanism, established earlier this year, providing for an automatic output rise of 500,000 barrels per day if the price of a basket of OPEC crudes remained above 28 dollars for 20 working days.
On Tuesday, OPEC announced that its basket of crudes had fallen below the 28-dollar level to 27.46 dollars.
However, on Wednesday, OPEC said the basket price, calculated as an average of oil prices from the previous day, had again jumped back over the 28 dollars level to 28.09 dollars.
An OPEC source said that any output increase could be delayed into August.
"Since the price went below 28 dollars yesterday, today is the first day with the price above that level. Therefore the 20-day period is now beginning," he said, asking not to be named.
GNI Research in its daily note said that prices were being contained because there was still hope that Saudi Arabia, the world's leading oil producer, would opt to pump more oil regardless of the other OPEC members.
Saudi Arabia began the latest round of intense OPEC activity by promising on July 3 an output increase unless the market stabilised, but incurred criticism from fellow OPEC members for its "unilateral" stance.
OPEC's enigmatic behaviour overshadowed Tuesday's data from the American Petroleum Institute which showed that crude stocks had fallen by 764,000 barrels to 291.9 million in the week to July 14 from the previous week.
On a 12-month comparison stocks of crude had fallen by 41.01 million barrels.
Petrol (gasoline) stocks edged 1.4 million barrels lower to 206.5 million and were 5.4 million barrels less than the year earlier.
Distillate fuel stocks rose 1.98 million barrels to 109.74 million and declined by 25.83 million barrels compared with the year before.
© Agence France Pre
© 2000 Mena Report (www.menareport.com)