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OPEC decision eases oil prices
SUPPLY AND DEMAND:
Oil traders doubted whether the rise in production would be enough to tame soaring crude prices ahead of the peak driving season in the US
REUTERS, SINGAPORE
Wednesday, May 26, 2004, Page 12
Oil prices eased yesterday but could test new highs on concerns that any increase in Saudi output would not be sufficient to meet spiralling global demand.
A blaze at an export pipeline near Iraq's major Kirkuk oilfield, possibly due to sabotage, and the closure of a pipeline in the US Northwest after a fire sparked by a suspected leak, reminded the market of how fragile supplies are.
US light crude futures shed US$0.08 to US$41.64 a barrel, after settling 4.5 percent higher at US$41.72.
The contract rose as high as US$41.82 on Monday, off US$0.03 from a record US$41.85 struck on May 17, the highest in the 21 years oil futures have been traded on the NYMEX.
London's Brent crude traded off US$0.22 to US$37.95 a barrel after jumping more than US$1.60 the previous day.
Oil prices had initially dived around 1 percent on Monday after Saudi Arabian Oil Minister Ali al-Naimi confirmed at the weekend that Riyadh would boost output by 10 percent next month to 9.1 million barrels per day (bpd).
The OPEC kingpin also called for a bigger-than-expected rise in the cartel's production limits to cool scorching oil prices.
Some traders doubted if the rise in output -- which could take effect only in July and reach the US in August -- would be large or timely enough to meet peak gasoline demand as the US holiday season starts this weekend.
"Prices could stay relatively high for some time," said David Thurtell, Commodity Strategist at Commonwealth Bank of Australia, but he noted that the additional supplies would help prices ease further down the road.
Still, the US government's Energy Information Administration (EIA) fears US oil prices are likely to stay strong in the US$36 to US$37 a barrel range even after Saudi Arabia increases its production and if OPEC raises official output.
Traders said data this week was expected to show US gasoline supplies rose 1.2 million barrels in the week ended May 21, but the build might not be enough since motorists were shrugging off record-high pump prices and continuing to fill up their tanks.
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