Sun, Jul 11, 2004 - Page 10 News List

Oil prices slip after OPEC soothes market


World oil prices slipped Friday, dragging New York crude just below US$40 a barrel, as OPEC ministers soothed a nervous market by renewing a vow to boost output.

New York's benchmark light, sweet crude for delivery next month fell US$0.37 to US$39.96 a barrel, a day after finishing above US$40 for the first time in a month because of terrorist attack fears.

Brent North Sea crude for delivery next month dropped US$0.72 to US$37.05.

Traders began to take profits after recovering from the shock of a White House warning the previous day that al-Qaeda may be planning a major US attack.

"Credible reporting" indicated al-Qaeda planned a large-scale attack in the US, Homeland Security Secretary Tom Ridge said Thursday, overshadowing weekly government figures showing commercial crude, gasoline and distillate inventories on the rise.

"After yesterday's big run-up we needed some fresh news to get us even to higher levels," said Fimat USA market analyst John Kilduff.

"There was just really some profit-taking going on."

Usual pre-weekend buying had dried up because of heavy oil purchases on Thursday, he added.

The market also got a chance to reflect on weekly data showing a rise in US commercial petroleum stocks.

A lack of terrorist or security incidents helped the market.

"The security premium sort of ebbs and flows on whether or not there is news [of an attack]," Kilduff said.

OPEC also helped depress prices as both the cartel's Indonesian president and the Saudi Arabian oil minister said the group would go ahead with a planned increase in output next month.

"OPEC still has a commitment to raise its quota by 500,000 barrels a day beginning in August," OPEC president Purnomo Yusgiantoro, who is also the Indonesian energy minister, told reporters in Jakarta.

Saudi Arabian Oil Minister Ali al-Nuaimi told the French newspaper Liberation that OPEC's decision to open up the taps next month was "firm and irrevocable."

"I think that helped," Kilduff said.

"I think no matter what prices end up doing between now and then, they are going to go ahead with that increase, Saudi Arabia in particular. In a way, the rhetoric does not matter. No matter what they say, they are going to increase production again here for August and for the foreseeable future."

The Organization of Petroleum Exporting Countries decided in Beirut at the beginning of last month to increase its overall production ceiling from 23.5 million barrels per day (bpd) to 25.5 million bpd starting last Thursday, and by a further 500,000 bpd on Aug. 1.

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