Oil prices slide on expectations of more production increase
Oil prices weakened further Friday, as expectation mounted that the Organisation of Petroleum Exporting Countries (OPEC) would agree a modest output increase at its meeting in Vienna on September 10.
Benchmark Brent crude for October delivery was trading at 31.64 dollars a barrel, eight cents lower.
In New York on Thursday, light sweet crude for October delivery ended the session 20 cents lower at 33.12 dollars.
Price falls were triggered earlier this week after Saudi Arabia, the world's leading oil producer, said it favoured a "suitable increase" in OPEC oil production to stablise the market.
But falls have been limited as analysts stressed that even though they ultimately expect more oil will be forthcoming, the Saudi pledge was vague.
An official statement announced that Oil Minister Ali al-Nuaimi had been instructed to hold talks with fellow OPEC members to seek "a suitable increase (in OPEC output) to guarantee once again the balance on the market and stability of prices."
On Friday, the world's second largest oil producer after Saudi Arabia, Norway -- which is not a member of OPEC -- stated its commitment to price moderation, but said it could not increase its oil output.
Oil and Energy Minister Olav Akselsen said: "We are producing at full capacity and we do not have any reserves available to dip into."
Price falls have also been contained by the latest figures on US stocks from the Department of Energy that on Wednesday showed a smaller increase in stock levels than data released on Tuesday by the American Petroleum Institute (API).
The US Department of Energy reported a modest increase in crude stocks of two million barrels to 286.7 million in the week ending August 25 from the previous week.
Year-on-year, crude stocks fell by 32.2 million barrels, the department said.
Those figures compared with data from the API, showing that crude oil stocks rose by 5.261 million barrels in the week to August 25 to 286.0 million barrels.
Crude stocks were 31.70 million barrels lower than the previous year, the API said Tuesday.
Saudi Arabia also triggered a dip in prices at the start of July when it made an earlier pledge to bring about an output increase of 500,000 barrels a day if needed to stabilise the market.
The initial reaction of fellow OPEC members was to denounce Saudi Arabia's "unilateral" stance, although they later promised more oil under the terms of the organisation's price band mechanism.
Moreover, unconfirmed reports have suggested that Saudi Arabia has been pumping more than its official OPEC quota.
OPEC's price band mechanism provides for an automatic output increase of 500,000 barrels per day if the price of a basket of OPEC crudes remains above 28 dollars for 20 consecutive days.
The basket has remained above that level since mid August and the mechanism could theoretically be triggered on September 8, but that would be only just before the OPEC ministerial meeting that will formally consider an output increase.
Although OPEC has already increased output twice this year, prices have remained high.
OPEC members and analysts have blamed shortages of specific products rather than an overall lack of crude.
They have stated that the most pressing current problem is low heating oil stocks ahead of winter in the northern hemisphere. - (AFP)
© Agence France Presse 2000
© 2000 Mena Report (www.menareport.com)