Print

Mail

wiki links

Producers' vows trim oil prices

Oil prices eased further below US$40 a barrel yesterday as an OPEC deal to pump more crude outweighed fears of political instability in top producer Saudi Arabia.

U.S light crude fell 45 cents to US$38.83 a barrel, following an 80-cent drop on Thursday, when OPEC agreed on a two-stage output increase of 2.5 million barrels a day in July and August.

Brent crude in London was down 41 cents at US$35.99 a barrel.

But oil dealers were served a sharp reminder of the risks to supply security in the Middle East that pushed crude to a 21-year high earlier this week.

Thursday's output increase by the Organization of the Petroleum Exporting Countries was aimed at cutting prices, but ministers said a "fear factor" of up to US$9 in the oil price is beyond their control.

"OPEC's decision to raise quotas to 25.5 million bpd at the June 3 meeting will provide some relief but it is unlikely to bring prices substantially lower," a Standard Chartered Bank report said.

OPEC raised formal output limits by two million bpd from July 1 and another 500,000 bpd from August, and set another meeting for July 21.

The deal makes little difference to actual supplies, analysts say, as OPEC is already pumping above new formal limits of 25.5 million bpd. Actual output in June will be even higher because those with spare capacity effectively have been granted license to pump at will for the month.

Saudi Arabia and the United Arab Emirates have said they will deliver just over one million barrels a day of real extra oil in June.

Thursday's price fall was also driven by US inventory data, which showed national crude stocks at the highest levels in almost two years.

The US Energy Information Administration said on Thursday that crude oil inventories rose in the week to May 28 to their highest levels since August 2002, helped along by near-record imports of 10.7 million barrels daily.

The agency said US gasoline stocks climbed 1.3 million barrels to 204.3 million, but remained 3.9 million barrels below levels a year ago.

OPEC President Purnomo Yusgiantoro said yesterday the group's official target range for oil prices could change from its longstanding US$22 to US$28 a barrel, but added that any shift would take time to work through.

In an interview with Italian newspaper Il Sole 24 Ore on Friday, Yusgiantoro said he expected a team working on possible changes to the price targets would wrap up its work by the time oil-producing countries meet in September.

"The new range will not be adopted quickly," he was quoted as saying. "Naturally the new range will take into consideration various factors, like changes in foreign exchange rates and inflation."

OPEC's reference crude oil price has been above the official band all year.

Yusgiantoro, who said the right oil price was US$25 "from a fundamental point of view," said OPEC countries were currently producing at about 88 percent of their capacities.
This story has been viewed 2226 times.