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Sun, Oct 08, 2006 - Page 10 News List

Oil prices drop amid rumored OPEC production cut


World oil prices dropped back below US$60 per barrel on Friday as speculation mounted that consensus was building within OPEC for a production cut.

New York's main contract, light sweet crude for delivery in November, closed down US$0.27 at US$0.59.76 per barrel.

In London, Brent North Sea crude for November delivery settled down US$0.17 at US$0.59.83 per barrel.

Traders said it looks increasing likely that momentum is building within OPEC for an output cut, but that this would not result in a special emergency meeting of the cartel.

OPEC president Edmund Daukoru, who is also Nigeria's oil minister, appeared to support this outlook Friday as he dismissed an Algerian report, stating that an emergency OPEC meeting would occur in Vienna on Oct. 18 and Oct. 19, as "incorrect."

The Algerian press agency APS quoted an "informed source" on Thursday who said the meeting would take place on Oct. 18 and Oct. 19 in Vienna.

Daukoru said on Friday that OPEC would likely decide by tomorrow whether to cut its daily production, fueling fresh speculation over whether the cartel would trim output following recent price falls.

The Nigerian oil minister said he was "optimistic" that a consensus "could be formed between today and Monday," but stressed that "no formal decision has been taken."

"Confirmation of an OPEC `consensus' to cut 1 million barrels of production is the first significant step in reducing the perceived burden of world oil surplus and that change may be enough to discourage aggressive near term selling," FIMAT analyst Mike Fitzpatrick said.

"The OPEC president isn't sure whether an emergency meeting on October 18th and 19th is necessary which probably is contributing to the trimming overnight of some recent gains," Fitzpatrick said.

Crude futures had surged close to US$61 on Thursday after Daukoru had said OPEC ministers were mulling an emergency meeting.

"We are toying with the possibility of having an emergency meeting," Daukoru, who is also the Nigerian oil minister, had told reporters.

An OPEC spokesman, however, stressed that no dates have been set for such a meeting.

"There's been no date set for an emergency meeting," spokesman Tareq Amin said on Friday.

Meanwhile Saudi Arabia would not oppose an emergency output meeting and might agree to an output reduction, according to the London-based Arab newspaper al-Hayat, which cited an unnamed senior OPEC official.

Saudi Arabia, the biggest member of the powerful 11-nation cartel, could cut its output by 300,000 barrels per day, according to the report.

Oil prices have fallen by around 25 percent since striking records in July and August around US$78 as the market has increasingly discounted geopolitical concerns and focused instead on buoyant energy supplies.

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