Oil prices eased Monday amid speculation that the Organisation of Petroleum Exporting Countries (OPEC) would sanction an output increase as part of its price mechanism.
Brent North Sea crude for December delivery was selling for $31.45 a barrel after closing at $31.62 on Friday.
Though investors remained nervous about the situation in the Middle East and the implication this could have on Arab oil supplies, the market was expecting output from key producers to be increased rather than cut in the short term.
This is because OPEC's price mechanism provides for an increase of 500,000 barrels per day if the OPEC basket price persists above $28 a barrel for 20 consecutive working days.
The OPEC price has already been above $28 for two weeks and stood at $30.57 on Friday. The OPEC mechanism already prompted the 11-nation grouping to boost output by 800,000 barrels a day as of October 1.
In New York meanwhile, a barrel of light sweet crude was selling for $32.82 , down 12 cents on its opening level. Earlier, oil prices had welled up again as market players took a nervous view following a weekend in which Arab nations threw their political and financial weight behind the Palestinians, and Israel subsequently declared a peace process "time out."
The fear remains that if the situation deteriorates further, Arab oil-producing states could in the medium term wield their crucial oil supplies as a political lever to apply pressure on Israel and its western allies.
World oil markets desperately need all the crude supplies they can get, given the severely depleted levels of reserves and the prospect of a cold winter ahead.
Prices were sent skyrocketing to 10 year high points above $35 earlier in the month amid concerns that a full-scale regional crisis could spark an Arab oil embargo.—AFP.
©--Agence France Presse.
© 2000 Mena Report (www.menareport.com)